Business Interruption Insurance
November 1, 2019
Business interruption insurance can be as vital to your survival as a business as fire insurance. Too many small business owners fail to think about how they would manage if a fire or other disaster damaged their business, making it temporarily unusable.
A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential. Every small business owner should consider these three things when determining if business interruption insurance is a good fit.
- Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
- Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate getting the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
- The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.
Extra expense insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually, extra expenses will be paid if they help to decrease business interruption costs. In some instances, extra expense insurance alone may provide sufficient coverage, without the purchase of business interruption insurance.
As with all insurance related matters, it’s important to consult with you insurance carrier and adjust your policies as needed.