Getting (Back To) Business Interruption Insurance

A business may unexpectedly shut down for many reasons, all of which can spell disaster for the owner. A force outside the business’ control may interrupt the daily operations, forcing the business to close its doors for some time. Whether it’s a fire, hail or wind storm, or some other disaster, you never know when or how an unexpected loss could occur. While the insurance policy provides for replacing buildings and property damaged in a loss, what about the time that your business is closed to make these repairs? How do you pay for this? Just because your business is closed does not mean that all of your expenses stop.

According to the Insurance Institute for Business & Home Safety, at least 25% of businesses that close due to a disaster do not reopen. But your business doesn’t have to be one of them. Purchasing business interruption insurance can replace income, profits, and other expenses after a disaster to help your business get back on its feet again.

Business Interruption or Time Element Coverage

Business interruption (or time element coverage) is a form of insurance coverage that replaces business income lost as a result of an event that interrupts the operations of the business, such as a fire, storm damage, vandalism, or theft. Business interruption insurance is not sold as a separate policy, but is normally either added to a property/casualty policy or included in a comprehensive package policy.

Most standard business insurance policies cover only loss or damage to tangible items such as your equipment, inventory, warehouse, office or store. It will not cover lost profits if your business cannot operate. Business interruption insurance can keep capital flowing through your company in the event of a disaster or other loss. Typically, business interruption insurance covers the following:

• Pay for lost net income and profits that would have been earned
• Pay for continuing expenses such as mortgage, utilities, advertising, taxes, wages and salaries
• Pay for interest on outstanding loans
• Pay your relocation and advertising fees if you set up shop at a temporary site
• Management of key customer accounts

Cost & Reimbursement

Generally, business interruptions insurance provides funds to make up the difference between your business’ normal income and its income during and immediately after a forced shutdown. Your pre-loss earnings are the basis for reimbursement under business interruption coverage, so it is important to keep detailed records either digitally or at another safe location to get the maximum reimbursement. Price of coverage depends on the risk of disaster to the premises. This may depend on the business location, nature of the business and how easily the business could function at an alternate location on a temporary basis.

Considering purchasing business interruption insurance to help protect your business in the event of a disaster? Contact the experts at the H&K Insurance Agency; we can go over your coverage and help determine the level of protection your business will need.