What is business interruption insurance (and does my business need it?)

Most business owners would probably agree that a major worry is having to close the doors temporarily due to a fire or another loss. Experiencing a business interruption throws everything into chaos. Of course, you have property insurance to help you get back on your feet and cover the expenses of repairs or rebuilding.

But here’s the kicker:

Property insurance will most likely not cover moving to a temporary location if you have to close for a short time. What’s more, property insurance also probably won’t reimburse you for the income you lost while you were closed.

However, there’s good news:

Business interruption insurance (or business income insurance) can help your business weather a loss that forces you to close your doors, such as a fire, vandalism, natural disasters, and equipment damage. While it’s often forgotten and neglected, business interruption is a very valuable type of coverage.

Let’s see what it’s all about.

What does business interruption insurance cover?

We mentioned before that business interruption insurance will help you if you ever have a covered loss that forces you to close your doors. Each policy is different and they can get a little complicated, so it’s important to talk to a trusted insurance professional when seeking business interruption insurance coverage.

Anyways, that disclaimer said, here are some of the things business interruption insurance could do for your business.

1. Reimburse you for lost income.

Obviously, if your doors are closed, you aren’t generating any cash for your business. And that can turn into a problem really quickly. Business interruption insurance would give you the income you would have earned if you had been able to operate normally. That way you don’t have to worry that you’re not bringing in any profit.

Something to be aware of – the coverage might not kick in for a few days following the initial closure, and it usually doesn’t work backward to cover those days.

2. Expenses of relocating.

Most likely, facing a loss that forces you to close your doors means that you’ll have to relocate and implement Plan B so that you can try to resume business operation. Business interruption insurance may help you cover the cost of moving and rent, depending on the coverage you have.

3. Paying your employees.

With no money being made, how are you supposed to pay the people who work for you? It would probably be a little difficult. And if you can’t pay people…well, they probably won’t be too excited to stick around. Business income insurance can help you retain your employees because it may provide for their wages.

It's important to consult a trusted insurance professional when buying business interruption insurance.

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How do I get business interruption insurance?

Okay. You’re probably wondering:

How can I go about getting some business interruption insurance?

Well. You can add it to a property insurance policy or a business owners’ policy. So, there’s that. And again, it’s really important to consult with a trusted insurance advisor when you’re going through the process of adding this coverage to make sure you get the policy that’s right for you.

How much business interruption insurance do I need?

Every business is unique, so every business is going to need a different amount of coverage. There are a few things to consider and discuss with your agent…

  • Your monthly overhead expenses
  • The cost of operating your business out of a temporary location
  • Whether you’re in an area that’s prone to natural disasters
  • How long it would take you to get back to normal following a disaster or fire
  • Whether you have a sprinkler system for your building

How much does business interruption insurance cost?

And now for the million-dollar question of buying business insurance:

How much does business interruption insurance cost?

The price depends on a few factors, including…

  • Your location
  • The type of business you have
  • How easy it would be for you to resume operation out of a temporary location
  • Your risk of facing a loss that would force you to close

The best way to get an accurate idea of how much business insurance costs is to get a quote (or multiple quotes.) Each business is different, meaning that each business is going to pay a different price for their insurance. By getting a quote you’ll know how much it would be for your business.

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So. That’s business interruption insurance in a nutshell. If you’re interested in finding out more about it or if you’d like to get business insurance quotes, all you have to do is give us a call or fill out our online form. We would be happy to help you with your insurance needs.