Business interruption insurance
Business interruption insurance
If a fire or other incident shuts down operations at your company, business interruption insurance can pay for lost revenue, day-to-day expenses, and rent or relocation costs.
Why do you need business interruption insurance?
From fires to storms, unexpected events could force your business to halt its operations. A temporary shutdown can have a long-term impact. When your business isn’t bringing in revenue, the costs of rent, employee wages, and other financial obligations can add up quickly.
Business interruption insurance helps your company recover from a forced closure by taking care of day-to-day expenses, lost revenue, or even temporary relocation. It's also called business income insurance.
What does business interruption insurance cover?
Business interruption insurance activates alongside covered commercial property insurance claims that force closure. It can help cover:
- Normal operating costs (rent, utility bills, wages, taxes)
- Relocation costs
- Lost revenue
Examples of coverage
Here are a few scenarios where business interruption insurance comes in handy:
- A fire forces your business to close.
- Your office closes for repairs after vandalism.
- Your business shuts down during a prolonged power outage caused by a windstorm.
Business interruption insurance endorsements
Business interruption insurance is attached to your business’s commercial property insurance or business owners’ policy (BOP). You can enhance your policy’s basic coverage by adding an insurance endorsement to this rider.
Extra expense coverage
Extra expense coverage takes care of non-ordinary operating costs that can help your business better manage a shutdown. Examples include renting new equipment, paying employees overtime, or hiring extra workers.
Contingent business interruption insurance
Small companies often depend on a primary supplier, partner, or customer. If they are forced to close, your company could suffer financially.
Contingent business interruption insurance pays for your ongoing expenses while you search for a replacement. As with business interruption insurance, this policy is tied to commercial property insurance. It activates with a covered event, such as a fire or storm.
Which companies should purchase business interruption insurance?
No one knows when an unexpected event will force their business to close temporarily. This is why most companies could benefit from business interruption insurance. The policy is particularly beneficial if your business’s normal operating costs are high.
To qualify for business interruption insurance, most insurance providers require that your business have a commercial location. If you operate your business out of your home, you likely won’t be able to purchase this coverage.
Business interruption insurance costs
The cost of business interruption insurance varies depending on:
- Commercial property value
- Operating costs
- Revenue
- Previous business interruption claims
Does business interruption insurance cover losses related to COVID-19?
Because business interruption insurance is tied to your commercial property policy, it most likely will not cover claims related to the coronavirus or other diseases. In most cases, your building must undergo physical damage in order for this policy to become active.
Most business insurance policies exclude coverage related to communicable diseases. If you think you might be eligible for a claim, contact your insurance company's claims department.