What Is Business Interruption Insurance?
October 18, 2022
Running your own business comes with its challenges, but nothing can really protect you when disaster strikes except for business interruption insurance. For example, a fire on the business premises or vandalism to your storefront could leave you facing financial loss; extensive repairs will need to be done. How will you pay your employees? How will you take care of the bills and payroll if your business income has stopped flowing in?
Many businesses cannot return from situations that impede their daily operations. That’s why business interruption insurance coverage can help you stay on top of your expenses when your business needs it most.
What Is Business Interruption Insurance?
Business interruption insurance covers your income and expenses if you’re unable to keep your business running. Some instances in which interruption insurance may help are during a theft, fire, or natural disaster.
Business interruption insurance is often referred to as “business income coverage” and is often included in a business owner’s policy.
What It Covers
Business interruption insurance coverage can help your financial situation while taking care of your operating expenses.
Covered expenses include the following:
- Profits: The business interruption insurance policy can cover your earnings based on the prior month’s performance. Any profits that your business would have earned during the interruption will be reimbursed.
- Operating Expenses: The coverage includes fixed costs related to keeping the business running.
- Temporary Location: Some business interruption policies may cover the costs involved if your business has to find a temporary location.
- Training Costs: During an interruption event, your business may have to replace machinery and retrain employees on how to use them. The costs associated with training and replacing the machinery are covered under business interruption insurance.
- Employee Wages: Business interruption insurance coverage will provide payment for your staff to avoid losing employees if the business isn’t generating income.
- Taxes: Even in the wake of a disaster, businesses must pay property taxes. A business interruption policy can take care of tax payments to avoid penalties.
- Loans: Loan payments typically come around each month. This coverage can help your business keep up to date with its loan payments even if the company isn’t running.
- Extra Expenses: The insurance policy will provide funds for reasonable expenses, such as the operating costs that help businesses return to normal and regain their footing.
What It Won’t Cover
According to the Insurance Information Institute, there are specific things that business interruption insurance won’t cover, such as:
- Any loss that is specifically excluded and has not been added back by endorsement.
- Communicable diseases such as COVID-19
- Undocumented income that isn’t listed in your business’s financial records
Who Needs Business Interruption Insurance?
For a small business owner, business interruption coverage can be a huge help in the wake of a disaster; this insurance coverage can be crucial for a new business location and the equipment/machinery necessary to keep operations running smoothly.
Some business types that can benefit from business interruption insurance include:
- Retail stores
- Gyms/yoga studios
- Pet groomers
Should I Get Coverage?
Small businesses benefit most from interruption insurance. Financial losses come in many forms and can impact your business. If you’re dealing with property damage, it can take months to complete repairs, meaning you’ll need the finances to keep things afloat. Receiving coverage can reduce the stress associated with a stalled business.
How Much Coverage Will I Need?
There are different types of coverage that are available. One type is called Actual Loss Sustained and does not give a specific limit of insurance. The other standard forms of coverage will ask for a limit of insurance. That being said, all business interruption insurance policies have a coverage limit. That means you’ll be put back into the financial state you were prior to the loss; no more no less. A policy holder being indemnified is the maximum amount that your insurance company is willing to give you for a business interruption claim.
Picking the proper coverage limit or type of coverage can be difficult. You’ll want to ensure that your amount will cover a large portion of costs; otherwise, you’ll be forced to take over any financial losses over the limit.
Consider the following factors when determining what your coverage should look like:
- Length of time it will take to get the business up and running after an interruptive event
- Cost of renting out a new space for your business
- Assuring your security and fire alarms are up to date
Take a look at your gross earnings and projections to determine what amount or type of coverage is appropriate for your business.
How Much Does It Cost?
Business interruption insurance costs will vary based on several factors, including:
- The industry you work in
- The number of employees
- The coverage limit you choose
Insurance can be included in a small business package or as an add on for an additional premium. The add on cost may run anywhere between $100 per month, and go as high as several thousand dollars a year, depending on your business and its location. Contact Nation West Insurance to receive a quote when looking for business insurance in Winnipeg.
Depending on the insurance provider, when you have business interruption insurance through a business owner’s policy, this policy type will typically bundle general liability insurance, commercial property insurance, and business interruption insurance into one policy.
- General liability insurance covers a wide variety of claims against your business, including injury, damaged property, copyright, advertising, and more.
- Commercial property insurance protects your business’s assets, including equipment, supplies, inventory, business records, etc.
We understand that your business is of the highest importance to you. That’s why we strive to offer the best insurance in Winnipeg. You can rely on our brokers to provide exceptional service and affordable rates. Don’t leave your business uninsured. Get the coverage you deserve today.