How Business Interruption Insurance Protects Your Business

How Business Interruption Insurance Protects Your Business

Business interruption insurance can be as vital to your survival as a business as fire insurance.  Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential. Business interruption coverage is added to a property insurance policy or included in a package policy.

Business interruption insurance compensates the owner for lost income if the company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire.  Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred.  The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.

Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track.  There is generally a 48-hour waiting period before business interruption coverage kicks in.

The price of the policy is related to the risk of a fire or other disaster damaging your premises.  All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

This information is intended for the client, individual or entity to which it is addressed. These articles contain concepts and opinions, and are not intended to represent the consensus of the insurance or risk community, nor to provide professional legal or tax advice. Please seek professional legal or tax counsel before making any decisions. The information provided does not change or modify any insurance policy, only the actual terms of the in-force policies will govern claim settlements.

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