Business interruption insurance, also known as business income insurance, is defined as a form of insurance that covers lost income when your business temporarily closes due to a fire, natural disaster, or other covered incident.
How business interruption insurance protects your business
When a fire or other event covered by property insurance forces your business to close, business interruption insurance provides funds to help cover your lost revenue, ongoing expenses, and costs related to moving to a temporary location.
As long as you have commercial property insurance (or a business owner’s policy) with a business interruption rider, your insurance will cushion the financial impact of a temporary closure. Specifically, it will pay for your:
Lost revenue – Business interruption insurance can help replace what your business would have earned had it not suffered the covered loss.
Rental or lease payments – Payments are typically due even if your site is uninhabitable.
Relocation expenses – Business interruption insurance typically covers your moving and rental costs.
Employee wages – With a business interruption rider, you will still be able to make payroll.
Taxes – Your tax obligations will continue even if your business is temporarily closed.
Loan payments – Coverage will ensure that your loans won’t go delinquent.
Losses due to inability to access your facility – If access is blocked to your business, your insurance will provide assistance until you can return. If you lose access to your office or facility, you typically have to wait at least 72 hours before you can begin collecting benefits.
However, your business interruption rider won’t cover all your business expenses while it is closed or relocated. The following items are excluded:
Utilities – Utility companies typically suspend charges while your building is unusable.
Undocumented income – You must be able to prove your income to receive benefits.
Partial closings – Your business must be totally closed to qualify for coverage.
Interrupted power – If a storm disrupts power lines, most riders will not provide benefits. That’s because power outages are common events, which are normally quickly repaired.
Most small business qualify for business interruption insurance. However, insurers typically don’t write coverage for businesses without fully dedicated sites, such as home-based businesses.
Who needs business interruption insurance?
Any business that requires a commercial property to generate revenue is a good candidate for this type of insurance. In addition, companies that lack sufficient cash reserves to cover a month’s worth of payroll and other overhead expenses should strongly consider buying business interruption coverage.
Businesses in the following industries are excellent candidates for business interruption insurance:
How do I find free quotes for commercial property insurance or a business owner’s policy?
Insureon helps small business owners compare commercial insurance quotes from A-rated U.S. carriers with one easy online application. Start an application today to protect your business against the financial impact of temporary business closures.