How do you keep a business going if you have to temporarily close? Insurance! Specifically, business interruption coverage, also known as business income coverage (BI) or business loss insurance. Here’s what you need to know.
A business interruption policy helps with operating expenses during downtimes, such as lost net income, mortgage/rent/lease payments, loan payments, taxes, and payroll. Policy limits should cover for more than a few days since getting back in business might take longer than you think. The restoration period is how long a policy will help pay for lost income and extra expenses while your business is being restored. There’s usually a 48 to 72-hour waiting period before it begins and is limited to 30 days, but can be endorsed to extend to 360 days.
A business owner’s policy (BOP) usually combines property, liability, and business interruption coverages. When purchased as a package, it’s typically less expensive than as separate insurance policies and helps ensure you have the proper underlying limits. Some businesses might be ineligible for a BOP because of the risks they pose and will have to buy coverages separately. An endorsement can also be added to a commercial property insurance policy that will extend the policy’s coverage to business interruption losses.
The coverage you need is determined by your gross earnings and projections of future profits. Business interruption insurance costs depend on factors, such as industry, number of employees, amount of coverage, prior claims experience, and location.
If a basic policy doesn’t have all the coverage you need, you can add endorsements.
Coverage limitations, such as time, should be discussed with an insurer. If your interruption coverage is part of a commercial property policy, it’ll only cover events named in the policy. Also, the following aren’t covered.
Interruptions can strain your ability to do business but insurance can help. Get in touch with us so we can talk about your options.