Your business is an investment of your time, money and energy. You probably already have an insurance policy in place to protect. (If you don’t, there’s no time like the present!). An important part of any business insurance policy is business interruption insurance.

Business interruption insurance works to protect you by financially covering you in the event of unforeseeable damages and expenses incurred because of those damages.  Key terms to keep in mind for this insurance include: covered peril and restoration. If your business sustains damage or is destroyed interruption insurance can help reimburse you for lost income and other related expenses. This will only take place if the damage is caused by a “covered peril” and will only cover losses sustained during a reasonable period of time for rebuilding or restoration.  Covered perils will depend on your policy and any listed exclusions.  Your restoration period will be determined by the amount of damages and how long it reasonably takes to get your doors open for business again.  In simpler terms, business interruption insurance provides financial relief in the amount of the actual loss provided the cause of the loss is not excluded by the policy and only during the time period it takes to rebuild or restore the business to its previous operating ability.

There are three primary types of business interruption insurance.

Basic coverage

Basic interruption insurance is designed to cover you losses and expenses while your business is in the midst or repairs or rebuilding and is unusable. This coverage ends as soon as repairs are completed or sooner if you have a predetermined time limit built into your policy. It is also important to note that this insurance extends only for as long as it reasonably takes for repairs to take place. If you have long delays or prolong the repair process, your insurer may decline to cover beyond the reasonable period of time.

Extended coverage

Extended coverage includes an additional period of time from your repairs being completed to the time your business begins to earn income. For many businesses, it may takes some time to reopen their doors and start to make money again. If you can’t afford a lag in profit earning, you may want to consider extending your interruption coverage and make sure you are covered in case there is a gap.

Contingent coverage

Contingent insurance extends even further, to connected issues and entities. If you are a primary supplier of parts and your inability to supply a vendor that relies on you is financially damaging, your contingent coverage can kick in and save the day. This policy has a much wider reach than basic coverage and can extend to earnings that are not directly tied to the physical damage of your business.

There are some key questions to consider when assessing your business interruption insurance needs.

What do you have available for reserves?

Business interruption insurance can help keep your company afloat and solvent in the event of an unforeseen disaster or damages. If you have a healthy amount of reserve funds in the bank, you may be fine with basic coverage. However, if being closed for a month due to unexpected damages could put you out of business, consider increasing your coverage.

What is included in your basic business insurance policy?

It is critical that you understand what is and is not included in your existing policy. It is always a good idea to have your insurance professional review your policy with you to make sure you understand existing exclusions and policy amounts. If it would only cost $10,000 to rebuild your business and income for six months, you probably don’t need a million dollar policy. Appropriate coverage amounts are determined by many different factors and should be thoroughly discussed with an experienced agent. Also, your insurance professional can review your policy and identify any gaps or double coverages that can be eliminated.

What is most necessary and important to keep your business running?

Can you live without the work space but desperately need the staff on your payroll? Is the existing business space critical to your earning ability? It is helpful to identify which parts of your business are essential and then work with your agent to ensure they are covered by your policy.

Your business is more than just a brick and mortar building. Interruption insurance can help cover the cost of moving to a new site, payroll expenses, loss of income and much more. The best way you can protect your investment is to make sure you have the business insurance you need. If you are concerned about your existing policy, please call our office and let us review current coverage. We work with many different insurers and quote your policy needs with multiple companies to get you the best pricing possible.

As a business owner you may put much more than just money into your business. Your blood, sweat and tears may also go into making your business a success. That’s why insuring your investment is so important.  Business interruption insurance may also be called business income insurance and you may ask yourself, “what can business interruption insurance cover?” This type of insurance is designed to protect your business in the event of losses that could be incurred by loss or damage caused by a covered peril. Covered perils will depend on your policy type of business interruption insurance and any listed exclusions. These types of policies typically cover the actual loss a business sustains during restoration.

While this all may sound very complicated, the structure of the policy is fairly straight forward once you move past the insurance jargon. In simpler terms, business interruption insurance provides financial relief in the amount of the actual loss provided the cause of the loss is not excluded by the policy and only during the time period it takes to rebuild or restore the business to its previous operating ability.

An example of a time when business interruption insurance may be used is rebuilding a business after a disaster such a fire. If your business were to suffer damage after a disaster, your business interruption policy may kick in and cover sustained losses such as:

Loss of income

If your business is closed for 6 months, you may lose a significant amount of sales. Your insurance company may use prior accounting records to determine an average amount of monthly losses.

Operating expenses

You may still be responsible for operating expenses which may be covered with this type of policy. Again, the insurer may look at historical records to determine an average expense and reimburse you accordingly. Your insurance may also help you with loan costs and even tax payments that are due.

Relocation

If your property is no longer usable you may be forced to relocate your business while the primary location is being rebuilt or repaired. Your insurer may cover moving and operating costs for your temporary location.

Employee wages

You don’t want to lose your best employees while your business is closed. Interruption insurance can help cover payroll costs until you are back up and running.

Additional expenses

You may be reimbursed for reasonable additional expenses that are incurred as part of the loss. Keep in mind that the insurance company will stress the reasonable part of this coverage.

There are some important points you should be aware of when considering business interruption insurance.

Business interruption insurance won’t cover everything.  It is not typically sold as a stand-alone policy. Because business interruption insurance is usually part of a broader business insurance policy, make certain that you understand what is and is not covered and where your policy starts and ends. For example a broader policy could exclude flooding from coverage, so your business interruption insurance will also not cover damage from floods.  Additionally, there are things that this type of policy won’t extend to. Flood damage and earthquake damage are good examples of items that are usually not covered unless they are specifically added to your policy or purchased additionally.

Business interruption coverage will only reimburse you up to a policy limit. Carefully consider what it would cost you to relocate your operations and be out of business if disaster struck. Use this cost to determine your best policy and coverage amounts.

This type of coverage stresses financial protection during the time of restoration.  Your insurance company will only be held liable for the reasonable amount of time it would take to rebuild, repair or restore your property. This period of time starts at the time damage was incurred and ends when your property has been reasonably restored.

There may be a waiting period. Many policies have mandatory waiting periods which can very from three days to three months. Make certain you know if your coverage includes a waiting period and what this time frame is. You should also have some savings set aside to cover this waiting period, just in case.
An important part of being a business owner is protecting everything you have built. Business interruption insurance provides coverage for you, your property, your income, and your employees in the event of unexpected disaster. Choosing your policy and understanding your coverage are imperative parts of making sure you have the insurance you need.

We offer the opportunity for you to work with experienced business insurance agents that will be detailed and take the time needed to ensure you understand your coverage. Our individualized attention ensures you can benefit from all aspects of your business coverage. We work with many different insurers which gives us the ability to get you coverage at the best possible price. We have made it our business to protect your business.