Business interruption insurance

Business interruption insurance covers the loss of income your business may experience in the event of a disaster Why would you need business interruption insurance?

Here’s an example of why you need it. Let’s say a neighboring business catches on fire and damages your exterior wall. Yikes. Luckily, nothing in your business was damaged, but you’re forced to shut down for several weeks while they make repairs.

Common events, or “covered perils” typically include fire, wind damage, ice or hail, theft, and vandalism. Business income insurance can help cover the lost income you would have earned during that time and other business expenses while you are closed.

Who needs business income insurance?

Small business owners who own or rent property in order to operate a business, such as a brick-and-mortar shop, restaurant, studio or office, should consider goods, gear and inventory insurance to help cover all your inventory, equipment, upgrades and furniture.

NOTE: Business income coverage is part of goods and gear/business personal property (BPP) insurance. It typically isn’t available as standalone insurance.

What is covered by business interruption insurance?

Business interruption insurance will help pay certain expenses when you have physical damage up to your coverage limits. These include things like:

Earned profits: The insurance company will look at your past financial statements to assess what you would have earned during that period. They will cover you accordingly.

Temporary location: As you rebuild your business, you will need somewhere to work. Some policies will cover the rent on a temporary location and even the expenses related to relocation costs and operations.

Fixed costs: Even if your office gets destroyed in a fire, you may still have to pay property taxes. The same goes for things like lease payments and certain salaries. Insurance may cover these operating expenses and others based on your prior costs.

Extra costs: Another business interruption claim is the extra expenses you incur while your property gets fixed. For example, additional office supplies or even a new coffee machine if that’s something your business needs to do business as usual.

Training costs: You may require training if you have to use new or different equipment. Business income insurance can cover your training expenses.

As you can see, business interruption insurance coverage can help policyholders pay for many things you need to keep your business running when you have a direct physical loss.

What’s usually not covered by business interruption insurance?

Typically, this insurance doesn’t cover the following:

• Broken items. Items such as glass resulting from a covered event or loss
• Flood or earthquake damage. These are usually covered by a separate insurance policy
• Undocumented income. Any income not found in financial records
• Airborne and communicable diseases. Common colds, flu, viruses, and communicable diseases such as COVID-19.