How business insurance can protect against unexpected losses
Business insurance helps you cover expenses when your business experiences interruptions. Just as you wouldn’t open a business without fire and windstorm insurance, it’s important to protect your business operations themselves. Business insurance can cover your lost sales and expenses when unanticipated events cause your business to slow — or make it impossible to do keep the doors open.
Here, we describe business interruption coverage and considerations.
How do you get business interruption insurance?
Small business owners sometimes fail to consider how they would manage following a fire or other natural disaster that causes commercial property damage. You can't buy business interruption coverage by itself. Instead, it’s purchased as part of your business insurance package.
Are employee wages included in business interruption insurance?
Business income and extra expense insurance is another name for business interruption insurance. It does pay for lost income if a business has to close temporarily due to events you don’t have control over.
How does this type of business insurance work?
Insurance companies design business interruption insurance to help business property owners survive a temporary shutdown. Most policies pay for costs and lost rental income — not including the costs that you won’t incur due to being closed.
What is business interruption value?
Business interruption value describes the income and cost that you incur whether your business remains open or closes temporarily. It includes profits, expenses incurred during the shutdown and continuing expenses —such as insurance and employee payroll.
What are the typical causes of a business interruption?
Many events can trigger a business interruption — including a fire or explosion, natural catastrophes, cyber incidents, machinery breakdowns, and supplier failure.
How much business interruption insurance you need?
Business interruption insurance covers losses associated with having to leave the premises due to an event already covered in your business insurance policy. It pays for lost revenue that you would have earned while the business remains closed.
Finding adequate coverage levels for your policy to sufficiently cover interruptions is one of the first things you should do as a business, according to the Insurance Information Institute.
Base your estimates on your financial records. A business interruption policy covers such items as electricity and other operating expenses that continue even if operations came to a dead stop. The policy limits should cover you for a considerable time, not just a few days. Most policies include a 48-hour waiting period before kicking in.
The price of this portion of your business insurance varies. However, it’s based on potential risks. For example, business interruption insurance is higher for a restaurant than a realty firm, due to a greater risk of fire and ongoing costs. Your agent can help you fully understand your needs, coverage, and costs.