Do I Need Business Interruption Insurance?

September 1, 2022

Wondering if business interruption insurance is right for you? Find out the coverage benefits to help keep your company running after a major disaster

Do you know if your business will survive if it has to close temporarily? An essential part of any business is having the proper insurance to cover the cost of replacing or repairing damaged equipment. However, many companies don’t consider what they need to continue after a major disaster. Business interruption insurance (or business income coverage) is a policy that can help with operating expenses after such events.

This insurance policy can help replace lost income if your business can’t open after a covered loss such as damage to your property. With a policy in place, you can more easily recover from a loss.

What Does Business Interruptions Insurance Cover?

Major disasters such as theft, fire, and wind can have devastating effects on businesses. Imagine a fire damages the building, leaving it uninhabitable and destroying equipment and merchandise. Now you have to worry about paying your employees, keeping up with bills, and finding a temporary location.

Business interruption insurance can help cover the following while the company undergoes restoration:

  • Rent, lease, loan, and mortgage payments
  • Taxes
  • Employee payroll
  • Lost net income (must be based on financial records)
  • Relocation costs if you have to open a temporary location
  • Training costs
  • Extra expenses for renting a temporary space

On the other hand, most business interruption policies do not cover:

  • Utilities
  • Glass or other broken items that are already covered by another policy
  • Damage from earthquakes and floods (typically covered under other policies)
  • Income that’s not documented in the company’s financial records
  • Pandemics (like COVID-19)

Also, a business interruption policy can package commercial property and general liability coverages for specific business sizes. If your business qualifies, you may realize cost savings with a packaged approach.

Coverage Cost Can Vary

Like other business insurance policies, several factors can affect how much you will pay for your policy. Some of these include:

  • Your industry
  • The number of employees
  • The amount of coverage you want or need

Where your business is located and if it’s at higher risk can also affect how much your policy will cost. For example, if your company is located where there is a high risk of wildfires or flooding, you may pay more than businesses that aren’t at risk for these disasters. It’s best to talk to an agent who can assess your situation and provide you with an accurate cost estimate.

It’s also worth noting that most business interruption insurance policies have a 48- to 72-hour waiting period before the policy takes effect. However, the policy usually lasts for up to a year, so you have time to make repairs and replacements. An experienced insurance broker can help you plan and choose coverage limits appropriate for your company.

Don’t Let Unexpected Circumstances Leave You Unprepared

Business interruption insurance can help protect your company if the unexpected happens. Even if you think you have coverage, reviewing your policy with a trusted advisor is a good idea because situations change. Take the first step today and work with an experienced broker to ensure you have the right insurance policies in place.

For more information, contact us today at 844-440-4222.

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