What Does Business Interruption Insurance Cover?

We all know that accidents can happen in the blink of an eye. That is why most people carry health and life insurance to help preserve their finances. But what happens if an accident happens that forces your business to close? This is where business interruption insurance steps in. 

What is Business Interruption Insurance?

Business interruption insurance is a type of commercial insurance that covers financial loss due to a covered situation, like an accident, natural disaster, or other factors that force your business to close temporarily. 

It helps replace your income and pay for bills during the time when your business is not able to be open. Ultimately, business interruption insurance can be a valuable piece of the puzzle to add to your coverage plan to protect your business. 

How Does Business Interruption Insurance Help?

Business interruption insurance is a multi-faceted policy that can help you in a number of ways. From lost income to extra expenses, read on to see how exactly it can help you. 

Helps Replace Lost Income 

Odds are that you rely on your business income as a source of your income. That means that if your business closes temporarily, you are temporarily out of a paycheck. 

If you have business interruption insurance, however, it can help replace revenue you would normally make if your business were open and can even cover payroll for employees.

Typically, these reimbursement amounts are based on your earnings before the loss occurred. 

Helps Pay for Recurring Operating Expenses

Mortgage, rent, or lease payments, taxes, and even loan payments won’t stop just because something has happened that caused your business to shut down. But business interruption insurance can help make up for these operating expenses, too. 

Helps Replace the Cost of Damaged Goods

If something happens that causes damage to contents within your business, you’re probably thinking “how can I afford to replace all those goods before reopening?” 

Thankfully, business interruption insurance can help replace the cost of that destroyed merchandise. If you have a lot of merchandise that would be expensive to replace, take that into consideration when determining your coverage needs. 

Helps Pay For Extra Expenses

Sometimes other expenses will arise when you experience a temporary closure that you hadn’t even thought of. This type of policy can help with that as well. 

It can cover the new costs needed to relocate temporarily, such as rent payment and other necessary costs of moving.

Business interruption insurance can even help with training costs for employees to learn how to use a new piece of equipment or machinery if it is a result of what caused the business disruption. 

How Do You Determine Coverage Needs?

Coverage depends on how much you need and, as with most insurance policies, there are coverage limits. When determining how much coverage you need, you’ll need to consider:

• Whether your business or building is in a safe location
• How safe your building is (ex: functioning fire alarms, sprinklers, etc.)
• How long it would take you to get your business back in order after a loss-causing event
• How long it may take you to find a new space

Keep in mind that if your costs go beyond your coverage limit, your policy will not cover them and you will be responsible for paying them. Depending on your responses to the above considerations, you may want to invest more or less in your policy.

How Long Does Business Interruption Insurance Last?

Business interruption insurance is intended to help provide coverage for a temporary close of business. Because of this, there is typically a restoration period, or a specific length of time that payments can last. 

The most common restoration period is one year, though this time can vary depending on the insurance policy and company. During that time, the insurance company expects you to make all necessary repairs, move locations, or otherwise plan for your business’ future. If you do not make necessary repairs within the timeframe in the restoration period, you will stop receiving payments.

Do you have more questions about business interruption insurance or other types of commercial insurance? Give us a call today to speak with an Independent Insurance Associates agent! We are here to help.