Are You Covered in Case of a Business Interruption?

business interruption insurance

If a fire, storm or other disaster caused your business facility to be temporarily unusable, what would you do?

Would you start looking for a new building to move into? Would you close down while repairs are made? Would you be able to continue paying your employees—or yourself?

Ideally, you would move to a temporary location while your permanent place of business is being repaired.

Business Property Insurance does not cover a move or a loss of income when a business must temporarily close. With Business Interruption Insurance, also referred to as Business Income coverage, this setback can be minimized by simply adding this coverage to your Property Insurance policy.

A small business owner ‘s restaurant in Mississippi was devastated by Hurricane Katrina, leaving her with a blown-out ceiling, massive equipment damage and an unsalvageable building security system.

“The Business Interruption Insurance paid for the 23 days we were down,” Joy Hoda told the Insurance Information Institute in 2010. “By getting that money, it wasn’t so hard for us to make our payroll.”

This doesn’t mean Joy didn’t sustain a loss; however, her Business Interruption Insurance reimbursed her for everything she would have made, minus any expenses the firm would have incurred. What the insurance allowed her to do was continue to pay her staff, meet her credit obligations and quickly reopen her business.

What is included in a Business Interruption Insurance Policy?

  • Compensation for lost income if you need to vacate your premises as a result of disaster-related damage covered under a Property Insurance policy.
  • Covers the profits that would have been earned based on previous financial records, had the disaster not occurred.
  • Covers operating expenses, such as utilities, that must be paid even though business temporarily ceased.
  • Covers expenses of operating in a temporary location while repairs to the permanent location are completed.

Considerations for Business Interruption Insurance

Business Interruption Insurance cannot be purchased on its own; it must be added to a Property Insurance policy or included in a Business Owner’s Insurance policy.

Your policy should be sizable enough to cover the amount of time it would take to rebuild your permanent business space. Generally your business must be closed for several days before coverage begins, and it does not pay for those days retroactively.

The price of coverage depends on the risk of disaster to your premises. This may depend on your business location, the nature of the business and how easily your business could function at an alternate location on a temporary basis.

What is Extra Expense Insurance?

Extra Expense Insurance is an additional coverage to cover the amount needed to avoid having to shut down your business while your permanent location is being repaired. This coverage reimburses for expenses that arise on top of normal business expenses, but are not covered by Business Interruption Insurance. Depending on the disaster, Extra Expense Insurance may be sufficient enough to provide financial relief without having to utilize Business Interruption Insurance.

 

Did you know that one-quarter of all businesses never re-open following an unexpected interruption? Don’t become a statistic. Business Interruption Insurance doesn’t just assist small businesses in meeting payroll and bills during a crisis; according to data from the Institute for Business Home and Safety, 25 percent of businesses never reopen following a disaster or interruption.

Insurance experts estimate that Business Interruption Insurance is one of the most, if not the most, valuable coverage available, yet business owners often overlook it. Since Property Insurance only covers the cost of physical loss or damage and contents of a business in the event of a disaster, Business Interruption coverage is invaluable in covering the loss of income while the permanent business location is being repaired.

Don’t wait until your business experiences a significant loss to consider this vital business insurance protection. Contact Roper Insurance & Financial Services at (303) 721-1145 to learn how this type of coverage can protect you and your business.