When a fire ravages your office building or a winter storm triggers a sweeping power outage, there's a strong possibility that the unexpected event will force your business to halt. The wrench in your business operations can mean more than repairs to your building and equipment. Chances are you will lose revenue, too.
Without the ability to bring in business, how will you meet payroll? Surely you've worked too hard to retain your talented employees only to lay them off while your business stands still. Then there are utilities, rent, and other expenses vying for your dollars while your business tries to get back on track.
What's a small-business owner to do? You could drain your savings account to try to make ends meet, but will that even cover all these escalating costs? And who wants to start from scratch, anyway?
If you don't have the deep pockets needed to float you through a setback, consider purchasing a Business Interruption policy (often called Business Income Insurance or BII for short). This plan pays for lost revenue and reimburses you for the ongoing expenses your business incurs following a covered property claim. Keep reading to learn how this policy can protect your income, even in times of uncertainty.
How Business Interruption Insurance Safeguards Your Revenue
When your business must face a covered property event, you lose money every day that your doors stay closed. The tolls can start to mount when you add up your ongoing expenses, such as…
- Lost sales.
- Lost rent or lease payments.
- Employee wages.
- Loan payments.
Without your usual revenue to cover the cost of your bills, it may be difficult to get your business back on its feet if you don't have Business Interruption Insurance. But with a BII policy in force, you'll have the replacement income you need to cover operational costs while you repair your building and replace your equipment.
Though it may seem unlikely that your business may face an event that would force it to halt operations, take a moment to reflect. In 2012, Superstorm Sandy rocked the East Coast and sent millions of businesses scrambling. And 2013 saw a string of windstorms and tornados tear through the Midwest. This year, we've already seen ice storms that caused power outages all over the country, creating plenty of business interruptions.
With these considerations in mind, it may be surprising to learn that only 33 percent of small businesses carry BII (according to a National Association of Insurance Commissioners study). But if you don't want to leave your business vulnerable to the financial devastation that accompanies natural disasters and unexpected events, know that the coverage can be included as a rider in your Business Owner's Policy.
When Will You Need Business Interruption Insurance?
If you're still unsure about whether your business could benefit from Business Income / Interruption Insurance, check out some of the events that can trigger a covered claim:
- After a windstorm causes a power outage in your restaurant, you lose thousands of dollars' worth of product when your freezer stops operating. If you had a Business Interruption endorsement in your Business Owner's Policy, your insurance benefits would cover the lost revenue caused by your inability to sell the damaged food.
- A fire guts your consultancy firm's office building, forcing your business to close for repairs. Your Business Interruption coverage can continue paying employee wages so you don't lose your trained workforce in the unexpected closure.
- Say you rent your commercial premises from a landlord. Your business interruption needs are not tied to their policy because, in most cases, commercial lease agreements require renters to carry their own insurance. So if you must continue paying rent even if a disaster makes the building unusable, Business Interruption Insurance can ensure you have adequate funds to cover your lease payments.
You'll want to note that your BOP's Business Interruption endorsement will only compensate income losses triggered by covered property damage. So your BII would kick in when you must close your business to handle damages caused by…
- Power surges or outages.
Also worth noting is that many policies come with a 72-hour time deductible, meaning you'll need to make it through the first 3 days of your covered interruption before your benefits will be available.
Protect Your Income: Purchasing Business Interruption Insurance
Nature is unpredictable, but your small business insurance should be a constant you can rely on. To ensure you don't lose revenue when disaster strikes, talk to your insurance agent about purchasing a Business Owner's Policy. This bundle cuts down your premium costs by grouping together General Liability Insurance and Property Insurance for less. BOPs also include 12 months' worth of Business Interruption Insurance, which sets you up to have a secure and profitable year. (For more information about BOPs and their versatile coverage, read "The Business Owner's Policy: Affordable Insurance for Small Businesses.")
To get started, fill out an online insurance application. Your quotes will be sent right to your inbox, and in most cases, you can compare business insurance quotes within 24 hours of applying.
And in case you're curious about the cost of business insurance, including BOPs and Business Interruption, see our guide, "How Much Does Small Business Insurance Cost?"