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. But too many small businessowners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable.
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 not sold separately. It is added to a property insurance policy or included in a package policy.
First, discuss with your insurance representative what is covered under your existing business insurance and how much coverage you have. It is not uncommon for business owners to underestimate how much coverage they need.
You and your representative need to thoroughly explore how long you would be shut down because of loss, and how long it would take to rebuild or relocate.
Business interruption insurance reimburses your income that is lost for as long as your business is shut down because of a disaster. It also pays continuing expenses, such as utility bills, that remain in force even if your business temporarily cannot operate. Most policies include a 48-hour waiting period.
Generally there is no limit to this coverage, which frequently is part of a Business Owner Plan (BOP) or your property insurance.
Based on your package, business interruption insurance also may include:
- Contingent Business Interruption — Losses that prevent a vendor from supplying you or customers from accepting your goods or services. This also may cover you if a key supplier suffers a loss even if you do not.
- Extra Expense — Pays for expenses that would not have been incurred if there had been no property loss or damage such as operating costs for a temporary location.
- Civil Authority — You may be covered if you suffer a loss at a property you do not own and the civil authorities deny you access. Unlike general business interruption insurance, this coverage typically lasts only a few days.
- Services Interruption — Covers you if you have to shut down because of other circumstances such as the power company suffering an outage.
- Ingress/Egress — If customers can’t get into and out of your business because of a loss such as an auto accident that results in emergency street repairs.
- Civil or Military Authority — If police make your business off-limits because of a crime scene investigation, for example.