Business Interruption Insurance is also known as Profits insurance, earnings insurance.
Do I need business interruption insurance?
Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. But too many small businessowners fail to think about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.
A business that has to close down completely while the premises are being repaired may lose out to competitors. A quick resumption of business after a disaster is essential.
Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the profits you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.
Business Interruption Insurance Covers:
Profits you would have earned, based on your financial records, had the disaster not occurred.
Operating expenses, such as electricity, that may occur even if the main business activities are temporarily stalled.
Some policies cover expenses incurred from operating out of a temporary location while the original premises are being repaired.
How to Purchase Business Interruption Insurance:
Business interruption insurance is not sold as a policy by itself. It may be added onto a property insurance policy or included in a package policy, such as a business owner's policy (BOP). Check with agents for different options.
Make sure your policy limits cover a sufficient amount of time to rebuild your business. It can take more time than anticipated after a major disaster to get your business functioning again. Generally, there is a 48-hour waiting period before the coverage kicks in.
The policy price is related to the risk of a fire or other disaster damaging your business premises. Factors that affect this are location, the nature of your business, and how easily your business could operate out of a temporary location.
What is Extra Expense Insurance?
Extra expense insurance reimburses your business for reasonable expenses beyond normal operating expenses that keep the business from shutting down during a post-disaster restoration period. Usually, extra expenses will be paid if they help decrease business interruption costs. Some companies may find extra expense coverage sufficient without business interruption coverage
