Making Up for Lost Time: Business Interruption Insurance

Bad things happen to good businesses. It’s after all why we insure them. But while your insurance policy covers your property and contents, there’s one very pressing concern it does not cover: time. When your business is open, every hour and minute is used to bring money into your business and your product or services out. Every day your business remains closed is lost profit, and what’s worse is customers you lose to competition because of your shuttered state. You need to make up for lost time.

Business Interruption Insurance

Also known as Time Element Coverage, in reference to the loss being increased by the time it takes for repair and recovery, Business Interruption Insurance provides coverage from the loss of income due to a disaster. Generally business interruption insurance covers the following in the event a disaster halts the business.

• Profits: Based on prior financial statements, it reimburses profits that would have been earned each month.
• Fixed Costs: Operational expenses and other costs incurred by the property.
• Temporary Relocation: Expenses caused by moving and operating the business from another location temporarily.
• Training Costs: If machinery has to be replaced, it may require retraining of staff. This covers the cost to train them on the new equipment.
• Additional Expenses: A catch-all, this is a reimbursement for costs in addition to those above for operating your business while repairing the property. There are stipulations and limits on these expenses.
• Government Mandated Closures: Some policies also cover required closures from state and federal agencies, such as curfews or street closures.

While general property insurance will cover the repair of your business after a disaster, the expenses for operating (or not operating) your company are not covered, even if the remodeling requires you to leave the premise. Typically this coverage isn’t sold as a stand-alone policy, but added to a business’s property insurance or business owner’s policy (BOP).

Types of Businesses Most at Risk

While any business will be reeling after a disaster knocks out their location, some businesses are more at risk than others. If any of the following sounds familiar, it would be worth looking at this type of specialty insurance for your company. Ask yourself these questions:

• Employee Payroll: when your company shuts down, what happens to your employees? Will you keep paying them, or suspend payments until work can resume. Are their members of your staff who will keep working? How long can you keep vital members employed on retainer?
• Outstanding Debt: Paying off loans or have a long line in your accounts receivable? When that cash flow dries up, are you going to have some angry creditors?
• High Operational Expenses: Do you lease the property your business is on? Do you have companies or persons on retainer, or services you can’t put off when your business closes, such as legal or security?

Want to learn more about business interruption insurance? Contact the H&K Insurance Agency. We’ve got the expertise to help you find the right type of insurance for your company, to cover you where you’re most vulnerable. Learn more about our business services here.