Business Interruption Insurance

When fire, theft and other events cripple a company, it can suffer financial losses severe enough to put it out of business. But business owners can soften this potential financial blow by carrying business interuption insurance, which often comes as part of business owner policy coverage. Heres' what you need to know about this important protection.

A Primer

Property insurance pays property damage claims and general liability insurance covers like-named events, but neither will help replace a company’s income or pay its continuing expenses when the business shuts down. However, business interruption insurance can help to meet payroll, pay regular expenses like taxes and mortgages, replace lost net income and even relocate the business in certain situations.

Covered events that can slow or shut down your business generally include fire and theft, but could also include a labor strike, a data breach that halts business operations and more. Some insurers even offer an additional measure of protection by insuring against supply chain disruption when a covered event halts the work or supply provided by vendors.

Business interruption insurance generally won’t cover losses from events that typically require specialized insurance, such as floods, earthquakes and sometimes, wind. Check your policy to make sure you understand what it covers and any exclusions.

What You Need

Not every business will qualify for the coverage. Generally, you must be in business long enough to demonstrate an established record of sales and a track record of profitability over time, plus the ability to maintain the same pace of profits. You will also have to prove your loss claim and the amount of time it will take to get your business back on its feet.

If you meet these terms, business interruption insurance may help keep your firm viable by paying vendors, interest on loans and employees’ salaries and benefits while they’re out of work. The physical size of your business, amount of coverage, its claims history and other factors will affect the price of the insurance. Do your homework before buying this insurance, because policies can differ greatly, as can covered events, limits and exclusions.