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Business Interruption Insurance

By September 15, 2014May 21st, 2020Insurance
If a catastrophe, such as a hurricane, causes your place of business to be temporarily unusable, your business may have to relocate or even close down. Your business will not be generating income and may continue to incur fixed costs such as rent and utilities. Business interruption insurance (also known as business income coverage) is designed to help in these situations.

Business interruption insurance is not sold as a stand alone policy by itself.   Typically, business interruption insurance is a rider on a company’s property insurance policy or business owner’s policy (BOP).  While basic ownership and disaster policies cover the costs of physical damage to structures, equipment, inventories and material goods, business interruption insurance takes care of the costs of being unable to operate.

Business interruption insurance covers:

  • Income you would have earned, based on your financial records, had your property not been damaged by the covered disaster.
  • Operating expenses, such as electricity, that may occur even if the main business activities are temporarily stalled.
  • Costs incurred in having to move and operate from a temporary location.

Many insurance companies offer “extra expense coverage” along with business interruption to lower business interruption costs.  For example, if your business can stay open by renting a piece of equipment, then the extra expense of the rental would be covered because the insurer would rather pay the extra expense of the rental than the cost of a shut down.

Business interruption insurance is considered the most valuable coverage your business can have.  Yet, it is also one of the commercial coverages most frequently overlooked by business owners.