Get the Basic Facts About Business Interruption Insurance

Get the Basic Facts About Business Interruption Insurance

Get the Basic Facts About Business Interruption Insurance

You never know when an unexpected situation is going to happen, so it’s always a good idea to take every precaution you can to protect your business. At least 25% of businesses that close due to some type of disaster do not reopen–but, you can avoid this by getting business interruption insurance.

Impacts to businessImportance of Business Interruption Insurance

Purchasing business interruption coverage as a part of your overall business insurance policy is a great idea and can help you protect your business in case of a disaster or other type of loss. This kind of insurance coverage can help replace your diminished or reduced income and profits after a covered loss, which means that your company can get back on its feet again. Before you invest in this type of insurance coverage, there are a few things you should know. For example, what does business interruption insurance actually cover?


Business interruption insurance will help in protecting you from your lost earnings if you can’t operate your business after a covered loss. This basically means that if you lose any income as a result of the loss, you can save those losses, exempting the expenses you would have to pay anyway. Consider if your products were destroyed by a fire just before you needed to ship them out to a customer. If you have business interruption insurance, it will help you to get some of the lost income back.

Extra expenses

This kind of coverage will also help you to pay off the extra expenses to keep your business running after a loss. If you have to switch your business location for whatever reason, your insurance would likely pay the difference of your utility costs because of your temporary move. What you earn regularly, before any loss, is what your reimbursement is based upon. Lost earnings are usually defined as revenues.

How much coverage do I need?

Getting the right level of business interruption coverage can give a company owner peace of mind if something arises. Consider the factors that help determine how much coverage you need.

The size of your business matters

This factor all depends on what kind of business you have. Different businesses need different things when it comes to coverage choices. A small business is definitely going to have different needs than some type of retail operation. If you have questions about choosing a certain kind of coverage, having a conversation with an insurance agent will help you. Before you talk to an agent, some questions to potentially ask yourself might include the following.

– How well-protected are your building and location?

– How long would it take you to get your business back in shape after a serious loss?

– Are your sprinkler systems up to date and functioning properly?

– Is there a space that you could use available in your area?

– How long would it take you to find a new location if a disaster happened?

The time you need to restore your business after a loss is known as the “restoration period.” This time determines how much profit you could lose and varies depending on the severity of the loss your business experiences. For example, a water leak could take only a few weeks to repair, but an event like a tornado might require months of work to get your business back together.

Additional coverage

Even standard business interruption coverage doesn’t take care of every single little thing that comes up in a crisis. If you leave a destroyed location and rent one that costs more, the insurance will only cover the old rate. Also, building replacement could be more expensive than you expect, due to modernized costs. To cover costs like this, you’ll need to get extra expense coverage.

Other risks

Don’t forget your business is also at risk when similar businesses are affected by some kind of disaster. For example, an explosion at your website’s host’s server location could mean that your site will be temporarily taken down or that a supplier might not be able to deliver something if it’s unavailable.

Getting reimbursed

The first few days after a disaster are generally excluded by insurers when considering their reimbursement calculations. So initially, you should put aside what you would need to cover those costs. Then, give your insurance agent documentation of your lost profits. You should also consider having electronic copies of your records, just in case printed ones get lost or are destroyed.

Business interruption insurance is something that can really help you in the case of a loss or a disaster. No matter what size business, you have, it’s something really important that you should have to prevent any huge damage to your business. Look into getting this type of insurance today so you can feel more confident about doing business tomorrow.

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