What is business interruption insurance?
As a small business owner, you want to protect your small business. You worked hard to create everything you have built so far, and now you need to choose the right types of small business insurance to protect your business if anything were to go wrong.
Sometimes things happen that are way beyond our control. Do you have a plan in place in case something were to interrupt your everyday business operations? If your business was shut down and you did not have business interruption insurance to protect you, you could very well lose your business if you do not have the money to repair, rebuild, and/or relocate.
Business interruption insurance keeps you in business going until you can reopen.
What is business interruption insurance?
Business interruption insurance is a type of insurance that helps cover your lost income, as well as helps pay for additional expenses when your business is impacted by certain things that can interrupt your everyday business operations. Also called business income insurance, this type of small business insurance is directly tied to business property insurance and is usually included in a business owner’s insurance policy (BOP).
A business interruption insurance policy will cover the costs associated with a temporary shutdown if:
- You have a standalone business property insurance policy or a BOP policy
- Your property insurance includes covering the cause of the interruption
- You have to completely shut down your business
When you purchase a business interruption insurance policy, your losses are only covered during the restoration period. This is the amount of time you receive to rebuild your business so you can start operating again. Be sure to check your policy to understand the details of your business’s period of restoration.
Business interruption insurance is especially important for businesses operating in places that are known for experiencing extreme weather and natural dangers.
Top causes of business interruption include fires, explosions, natural disasters, legal changes, and cyber-attacks. How well is your business protected against the unknown?
What does business interruption insurance cover?
How does business interruption insurance protect your small business? This type of insurance is especially important for small business owners who rely on using physical assets and/or physical locations to operate their businesses.
Business interruption insurance helps cover
- Rent or lease payments
- Loan payments
- A loss of revenue
- Operating costs
- Employee wages
- Relocation costs
- Additional expenses
Covered risks and dangers often include:
- Falling objects
Example: You own a retail store and a fire damages all of your merchandise and part of your building, causing you to close for repairs. Business interruption coverage will help cover your everyday expenses so you can get back up and running as soon as possible.
Example: A storm blows through your location, causing a tree to fall onto your building. Business interruption insurance helps cover you financially, giving you the money you need to make necessary repairs.
Business interruption insurance usually has a coverage limit, meaning there is a maximum amount you can receive to cover a potential claim. If any of your financial losses go over and above your coverage limits, it is your responsibility to pay this additional amount. This makes it very important for you to decide on the right amount of coverage for your small business.
Consider the following to help you choose your coverage amount:
- How long will it take you to get back up and running after experiencing an interruption in your business?
- If you rent or own building space, how well is the building protected?
- Does the building have fire alarms and sprinkler systems?
What is excluded?
A business interruption insurance policy usually will not cover:
- Short or partial business interruptions
- A business that does not have documented income
- A business that is closed voluntarily after suffering serious damages
- Home-based businesses
- Broken items, including glass
- Utility expenses
- Pandemics, viruses, or communicable diseases
- Damage due to floods or earthquakes – these are covered in a separate insurance policy
Who needs business interruption insurance?
A business interruption insurance policy is specifically designed to help any business financially recover from a temporary shutdown.
Professions that best benefit include:
- Cleaning businesses
- Mechanic shops
- Pet groomers
- Retail stores
- Yoga studios
Other Insurance options
- General liability insurance
- Professional liability insurance
- Business auto insurance
- Property insurance
- Workers’ compensation insurance
- Cyber insurance
- Inland marine insurance
- Surety bonds
- Read your insurance policy so you know exactly what types of risks and dangers your policy protects your business against
- Make sure your policy limits are sufficient to cover your business for at least one week
- Always document any damage and keep all receipts
Do I have to purchase business interruption insurance?
No, you are not legally required to buy this type of small business insurance. Business interruption coverage is an optional insurance choice that specifically protects you against financial losses caused by certain events, supporting you through periods of suspended business operations so you can stay in business.
Does business interruption insurance cover loss due to COVID-19?
No, because pandemics do not physically harm a business or a business’s location.
Are all business interruption insurance policies the same?
No. When you choose to protect your small business with this type of insurance policy, it is specifically made in a way that supports your particular business.
Can any business apply for business interruption insurance?
Yes! Any business can apply for this important type of small business insurance.
How much does business interruption insurance cost?
When it comes to how much a business interruption insurance policy will cost, it depends on things like your industry, your revenue, your location, your payroll, the amount of coverage you need, the overall value of your property, the type of business property insurance you have, and whether or not you have previously filed any insurance claims.
In order for you to determine the right amount of coverage you will need to protect your business, simply use your gross earnings and future projections to estimate your profits. The last thing you want to do is not get the right coverage amount, which means you will need to pay out of pocket for any additional expenses associated with the interruption.
Insurance coverage has never been easier
Ready to save money by comparing insurance quotes from more than 30 top insurance carriers? As a small business owner, you understand the importance of ensuring your business against damage or liability. Filling out this form lets you know exactly how much you can expect to pay to protect your small business.