To qualify for business interruption coverage, your business must sustain direct physical damage that falls within its policy’s parameters and terms. Your policy’s details and terms will help determine the precise criteria. Small businesses with 100 or fewer employees and annual revenues of less than $5 million typically purchase a BOP as part of their business owners’ policy (BOP). Costs depend on the risk, such as natural disasters such as tornadoes, hurricanes, wildfires, and more.
1. Loss of Income
Business interruption insurance provides businesses with compensation against losses caused by property loss or shutdown that reduce income, as well as regular operating expenses like rent, employee wages, and utilities that must continue being covered while they don’t generate revenue. Relocation expenses, loan payments, and taxes due may also be covered under business interruption policies, while “period of restoration” coverage typically does not extend beyond this time frame; other forms of losses that might require commercial property insurance such as floods, earthquakes or mudslides might require separate policies to compensate.
Business interruption insurance premiums vary and are frequently combined with commercial property and general liability policies in a business owner policy (BOP). A BOP provides less risky and more affordable property and business income interruption coverage for small-to-midsize businesses. When working with an insurance firm that understands your unique risks and provides appropriate policies.
2. Operating Expenses
Business interruption insurance reimburses your operating expenses due to a covered event, such as payroll, rent mortgage payments, or utility costs you would have had to incur if your business were still operational. Other expenses related to closing your business could include costs for hiring temporary workers as a make-up solution, purchasing supplies that would have been necessary if it had remained open, training costs, and relocation expenses for offices or storing equipment elsewhere. Furthermore, taxes that you would have been responsible for were your business still operating and loan payments may also be covered in these expenses.
Business interruption coverage can be purchased separately or as an endorsement to a commercial property policy, while there are also Business Owner’s Policies (BOPs), which combine property, liability, and business interruption insurance policies into one policy that’s typically less costly than purchasing individual policies; it also helps ensure the correct underlying limits are in place – but may not be suitable for all companies.
3. Relocation Costs
Many small businesses would struggle without adequate business interruption coverage. The costs associated with temporarily opening or closing locations, paying employees during a company shutdown period, lost profits and reputation damage can quickly put any financially stable firm out of business. Business interruption insurance typically provides coverage for net income (calculated using documented profits from an earlier timeframe), operating expenses, relocation costs, and extra expenses such as loan payments, mortgage or lease payments, taxes, and employee wages incurred due to business disruption. It may even cover lost customers.
Business interruption insurance can often be found bundled together with general liability and commercial property coverage in a business owner policy (BOP), costing anywhere between $40 to $130 monthly according to Insureon. However, standalone policies can also be purchased – the key is having access to an experienced team of risk professionals who understand your business risks well enough to suggest suitable policies – in some instances, these experts may suggest additional coverages such as data breach insurance and cyber liability policies as well.
4. Taxes
Business interruption coverage provides valuable protection not only against lost income and expenses but also taxes owed following an unexpected disaster. While you cannot depend on an insurance policy alone to cover them all, this type of protection can provide extra financial relief by covering non-exempt employee wages while your business is closed as well as moving and storage costs, renting temporary space/equipment rentals, transportation costs or any other associated with its closure.
Business interruption coverage is frequently included as part of commercial property policies, while it may also be found as part of small business owners’ policies (BOP), which typically offer protection for property, liability, and business interruption risks. Before purchasing either type of coverage, however, you must meet with an experienced agent to discuss both the risks and limitations of said policies to get protection that’s tailored specifically for your unique business.
5. Loan Payments
Business interruption insurance helps reimburse your company for lost revenues during any periods when they’re shut down, covering payroll, operating expenses, relocation costs, taxes, and loan payments – potentially saving it from bankruptcy or forced closure allowing it to stay operational during temporary setbacks – usually up to one year of coverage is provided. An essential feature of business interruption policies is to cover losses due to direct physical damage – for instance, a fire or hurricane must destroy your property for it to qualify as coverage, but also orders by civil authorities to close or quarantine it are covered under this protection policy.
Some policies also offer extra expense coverage to cover additional rent or moving costs, staffing fees to get your business running again quickly, training expenses, and expedited equipment orders that might arise following a disaster. While not covered under standard commercial property policies, extra expense coverage can help keep doors open during an emergency and is an invaluable addition to your company’s business insurance.
