Business

What is business interruption insurance?

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One of the most important protections offered by a business owners insurance (BOP) is business interruption insurance will assist your company to remain afloat in the event of a disaster.

Business interruption insurance definition

Also called business income insurance, Business interruption insurance can help pay for bills, replace lost revenue and pay your payroll if a covered event temporarily closes your company.

Costs for business interruption insurance

The cost of insurance for business interruption varies depending on the coverage you require. To figure out how much insurance you require, think of the worst-case scenario, like the event of a fire that eliminates your home as well as its contents.

Next, determine your earnings over the 12-24 months that it will be required to rebuild your company, considering the following:

  • The expected growth rate and the inflation
  • Costs of moving and relocation
  • Costs of doing the business in a temporary place, including signs on the outside and other forms of advertising
  • Charges that you don’t have to pay for, like the cost of building maintenance
  • Costs for employees who will not be employed during the rebuilding include employee benefits and workers’ compensation insurance1.

Once you’ve established a dollar figure (the amount of insurance you’ll require), discuss with your insurance company about including business interruption insurance in your insurance policy. Be aware that business interruption insurance isn’t sold as an insurance product on its own but is typically offered with a BOP to endorse commercial property insurance.

What kind of business interruption insurance is available?

If your company is forced to relocate or rebuild because of a catastrophe, like an accident, fire, or another disaster, the business interruption insurance policy can assist you in:

  • Lost profits
  • Mortgage/rent
  • Utilities
  • Taxes
  • Payroll
  • Advertising
  • Relocation fees

Business interruption insurance works in combination with your commercial property insurance. If your business is damaged by fire and your commercial property insurance will cover the physical damages, and your business interruption insurance will pay for the loss in net revenue.

Other than fire, events include vandalism, hail, wind, or damage to your property or equipment. The closures caused by flood earthquakes, broken glass, or a quake usually aren’t covered under the business interruption insurance.

Brian Santiago

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