If you own a business of any kind, you should consider business interruption insurance to replace lost income and provide payment for extra expenses if your business is ever impacted by a covered peril. Also called business income coverage, this type of insurance should be part of your overall business owners insurance.  

What Does Business Interruption Insurance Cover?

Business interruption insurance offers protection against covered perils which can include theft, wind, fire, lightning or falling objects – basically things that are out of your control but that force you to stop working for a period of time while the damage is fixed. Take this example: a fire damages your business, rendering the office uninhabitable as well as destroying merchandise just as you were about to ship it out to customers. Business interruption coverage would reimburse you in these ways:

  1. For lost income arising from the destroyed merchandise (minus expenses already paid, like shipping). Pre-loss earnings form the basis of business interruption coverage. Lost earnings, or the actual loss sustained, are your revenues minus your ongoing expenses.

  2. For extra expenses if you have to temporarily vacate the building and relocate your business due to the fire (i.e., the cost of rent somewhere else).

It’s important to note that property coverage in your business owners policy would pay to repair the damage done to the building if you are the owner of the property, while business interruption coverage would not pay for these repairs, just the lost earnings. 

How Much Coverage Do You Need?

There is a coverage limit with business interruption insurance, which is the maximum amount your insurer will agree to pay toward a covered claim. Financial losses that go over and above the coverage limit will be your responsibility. That's why it's critical to select coverage limits appropriate to your business.

Take these factors into consideration before choosing insurance for your business:

  • How long would it take to get your business up and running after a loss?

  • Do you rent your office space? If so, how well protected is the building?

  • Are the fire alarms and sprinkler systems functional and up-to-date?

  • Is comparable commercial space available in your area, or do you think it would take many weeks to find a temporary location that suits your needs?

Restoration Period

Your business interruption coverage will have what’s called a “restoration period,” which is the length of time your policy will pay out for lost income and extra expenses after you make a covered claim. Always read your policy thoroughly so you understand when the restoration period starts and ends. 

There’s usually a 48- to 72-hour waiting period before the restoration period kicks in, but it will last up to a year. So, let’s say your business was damaged on September 1…you would get business interruption coverage benefits until September 1 of the following year.

 

Contact Bearce Insurance for a Quote on Business Interruption Insurance 

 

To learn more about business interruption insurance and how it can benefit you, contact us locally at 508-586-3400 or toll-free at 800-498-9900, or get an online quote today.