How to Get Income Protection with Business Interruption Insurance
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Protect Your Income with Business Interruption Insurance

Running a small business can be like walking a tight rope suspended precariously hundreds of feet above the ground. Managing day-to-day operations, employees, and budgets is a constant balancing act. A ripple in the high wire can disrupt everything, and without an insurance safety net, your business might be in big trouble. You wouldn’t have unemployment benefits if the business fails – no guaranteed paycheck every month.

That’s why there's Business Interruption Insurance. This policy can reimburse you for lost income when your business is forced to shut down because of a covered disruption. In short, it can help your business survive a momentary slip.

Sign Me Up! How Do I Get Business Interruption Insurance?

First, let's clear up any confusion about what Business Interruption Insurance does. Some insurers call this coverage Business Income Insurance. Is there any technical difference? For most carriers, not really. Both policies can provide coverage for:

  • Loss of revenue: These are the profits you would have earned if an interruption did not occur.
  • Loss of use: This is when you have to shut down or suspend operations because of a covered event.

To learn more about the policy's limitations and exclusions, read "What Business Interruption Insurance Can and Can't Cover."

Who's Eligible for Business Interruption Insurance?

Business Interruption Insurance is often included in a Business Owner's Policy (BOP) as part of its Commercial Property coverage. But not everyone is eligible for Business Income coverage. For example, home-based businesses usually can’t get it added to their BOP because most insurers will only write Business Interruption for dedicated business premises.

Other factors that may restrict coverage are…

  • The business's classification or industry.
  • Previous business interruption claims.
  • Business location.

Policies may also vary among insurance providers. Business Interruption coverage is often part of "special packages" offered by the carrier. Each insurer may include different Business Interruption limits and exclusions to distinguish itself from the competition.

Will Business Income Insurance Be Enough?

Business Income Insurance helps your business get back on its feet after a disruptive event forces it to a standstill. As your business rebuilds and recovers, it can help you…

  • Relocate to a temporary location.
  • Replace lost revenue.
  • Pay for ongoing expenses (e.g., rent, employee wages, and loans).

It may ensure your business's shutdown is only temporary, rather than permanent.

But what if Business Interruption Insurance isn't enough to keep things aloft? Businesses that need more coverage can add on endorsements, such as…

  • Extra Expense Insurance. This rider funds the "extras" (i.e., non-ordinary operating costs) that can help return the business to its normal speed. This ultimately decreases what the insurer has to pay because the business may regain functionality faster than usual.
  • Contingent Business Insurance. This rider can help out when a supplier or business partner is shut down by a covered property event and forces your business to halt operations, too. This can be useful if your business relies on:
    • A single supplier or manufacturer for most of its materials or merchandise.
    • A few recipient businesses to purchase merchandise or materials.
    • Other nearby businesses to attract customers.

Each business’s income protection needs vary. If you’re not sure what type of coverage your business may benefit from, talk to your insurance agent to learn about your options.

Business Interruption Insurance: Further Reading