Business owners face many risks to their companies and financial well-being. Many of those risks can be covered by insurance if you qualify and can afford the premiums. According to a business partnership lawyer, one coverage most businesses should at least consider, if not purchase, is business interruption insurance (also known as income insurance and contingent business interruption coverage).
If there’s a covered event or loss and your business loses income, this can help you replace that lost money and provide benefits to pay your bills. Some losses that may be covered include:
- Severe weather damages your business, forcing it to close temporarily for repairs
- Local government requires a road closure that shuts down your company
- A fire destroys your business, and you lose income until you can recover
Your coverage will have exclusions and limits. Learn about them before paying premiums so you won’t have a nasty surprise if you expect benefits but your claim is rejected.
What’s Covered?
If a covered loss closes your business, interruption insurance may help with lost revenue you’d expect to make and operating expenses that you’d expect to pay during this downtime, such as:
- Lease, rent, or mortgage payments for your space
- Business loan payments
- Taxes
- Temporary relocation costs
- Extra expenses you usually wouldn’t incur
The more you want covered, the greater the cost, so you must balance the costs and benefits as our friends at Focus Law LA have shared.
What’s Not Covered?
Business interruption insurance typically won’t cover the following:
- Items broken in a covered loss or event
- Earthquake or flood damage, which may require different coverage
- “Under the table” income you earn illegally or don’t report for tax purposes
- Power interruptions
- Public health emergencies, such as outbreaks of infectious diseases
Work with your agent to see if there is another way to cover something that is not covered by business interruption coverage.
How Much Coverage Do I Need?
Every business interruption policy has a coverage limit. This is the maximum amount you may receive if you suffer a covered loss. How much to buy will have to be an educated guess based on your costs, the kinds of covered events that are more common in your area, and how long these losses usually last.
If you’re in an area with frequent extreme weather or increasing fire danger, you should buy more than other companies without these issues. You should work with your insurance agent and talk to other business owners about how they determine how much coverage to buy.
How Expensive Is Business Interruption Insurance?
It depends on many factors, including your:
- Location
- Industry
- Number of employees
- The costs you want to be covered and how much they are
- How high a chance a covered loss will happen
If your business is near the shore in a hurricane-prone area, your premium will be more than if it was farther inland. The more remote workers and locations you have, the easier and faster it may be to get back up to speed if one building is damaged.
Need Help? Ask For It
Talk to your insurance agent or broker about business interruption insurance. If you currently have it, you may have too little or more than enough because your situation is changing, so get the right coverage. If you have business interruption insurance questions or are involved in a coverage dispute with your carrier, talk to your attorney to see if they can help resolve the situation.