Business Interruption Insurance
What is business interruption insurance?
Business interruption insurance, sometimes called business income insurance, protects against unforeseen events that disrupt your operations. If the event is a covered peril, like a fire, business interruption insurance could compensate you for lost income, relocation expenses, employee wages, and other unexpected costs.
Depending on your carrier, business interruption can be included in your commercial property coverage on a business owners policy or added as an endorsement.
How does business interruption insurance work?
Business interruption insurance works by providing coverage for lost income and extra expenses when you can't operate normally due to a covered loss.
After an accident, a small business owner files a claim and enters the waiting period for business interruption insurance. Depending on the carrier and policy contract, this waiting period could last 24–72 hours. Once the waiting period is over, the coverage is active, and the insurance company starts calculating payment.
Your insurer will determine a reasonable timeframe for repairing your premises and resuming work. They'll base their decision and payout on an assessment of the accident type, building age, location, and more.
What does business interruption insurance cover?
Business interruption insurance covers unexpected events that cause you to close temporarily, like fire, wind, and hail damage. After a loss, your insurance will pay out the claim. These funds can help with various expenses, such as:
- Lost net income
- Rent
- Payroll
- Loan payments
- Taxes
- Temporary workspace
If you need help navigating this process, a claims expert can help.
Some perils, such as earthquakes, are business interruption exclusions. However, you might be able to add a policy endorsement to cover them. Ask about how to get the right type of business interruption insurance for your company when getting a quote.
Determining coverage amount
Knowing how much coverage you need to protect your business is essential. You can estimate by calculating gross earnings and adding future profit projections. Reassess your policy regularly to ensure you have high enough limits for your business. If you experience a business interruption and costs and losses exceed your coverage limits, you'll have to pay the difference out of pocket.
How much does business interruption insurance cost?
Business interruption insurance cost depends on a variety of factors. Policies are customized to your specific needs and take the following into account:
- Amount of coverage: The higher your revenue and profits, the more it will cost to insure your business.
- Industry and profession: Different industries and professions are prone to different perils. For instance, a bakery is at higher risk of a fire than a marketing agency. That increased risk can result in a higher premium.
- Number of employees: The more employees you have, the more wages you will need to cover during an interruption, which can affect your rate.
- Location: Businesses in areas prone to natural disasters and certain environmental risks will need additional coverage to account for those perils.
Get a business owners policy quote to learn what you'll pay for business interruption coverage.
Who needs a business interruption policy?
Small and medium-sized businesses that rely on a physical location can benefit from business interruption insurance. These companies often don't have the cash reserves to manage lengthy closures. Business interruption coverage can help them resume operations after unexpected events.
Some professions that benefit from this coverage include:
Speak to an agent to learn whether a business interruption policy is the right fit for you.
