When a disaster strikes your business, the premises may be temporarily unusable. Your business will not be producing income and may continue to incur fixed costs (rent, utilities, etc.). Standard commercial property insurance does not cover the loss of income caused by the temporary closure of the business. Business interruption insurance can be included on your commercial property insurance coverage to cover this loss. Business interruption insurance can be a key asset for business survival in tough economic times or when the economy is thriving, but is often overlooked, nonetheless.
Business interruption insurance is probably the most valuable coverage your business can have. It is also coverage that is frequently overlooked by businesses. This is because it is easy to forget that income cannot be produced without an operating business or the business owner believes property insurance will cover all losses.
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. If this is not possible, insurance coverage to help the business stay afloat is an absolute must.
Essentials of Business Interruption Coverage
- 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. Not every disaster is as devastating as Hurricane Katrina, but planning for that possibility will instil tremendous piece of mind for a business own