Business Interruption Insurance

Understanding Business Interruption Insurance

As a business owner, you understand that active business operations typically generate a profit. If your business shuts down, so does the cash flow. Maybe you’ve heard about business interruption insurance, you don't have the time or money to invest in extra insurance. How does it even work? Let an independent agent in the Trusted Choice® network guide you through the details of business interruption insurance.

If cost is a factor, don’t be concerned. An independent agent has the ability to compare multiple business interruption insurance quotes and policies to find coverage that works for your business and your wallet. Get coverage that’s tailored for your business. Find an independent agent right in your local area to get started.

Why Would My Business Close?

  • Fire: Even if it only destroys a part of your building, you may need to close your doors for a few weeks for cleanup.
  • Hail: In addition to busted windows or a damaged roof, you may have lots of water to clean up.
  • Windstorm: Replacing roofing or siding is an expensive project and staying open could place customers in danger, increasing your liability.
  • Vandalism: Depending on the extent of the damage, you could find yourself making a complicated equipment replacement strategy.
  • Equipment damage: Even the most reliable machine breaks down. It could take days or weeks to get the right part and get back on schedule.

Do I Need Business Interruption Insurance?

Most large businesses carry a business interruption loss policy because operations are spread across the country. Although the headquarters of a corporation are based in New York City, its main shipping facility could be destroyed by a tornado in Oklahoma. Business loss insurance is a valid way to protect revenue. Adding a loss of business insurance endorsement to your property coverage is an easy process. However, small businesses owners may find themselves torn between expanding coverage and raising limits.

It’s essential to examine your unique risks when trying to determine whether to increase coverage or not. With one location, it’s likely you might work with a limited number of suppliers. Disaster doesn’t always occur at home, but if you don’t have access to a replacement shipper, you could be dead in the water. Here are two tips to help you determine whether business interruption insurance is right for you:

  • Examine risk culture: Does your current insurance policy have a very high deductible? Do you have enough revenue in the bank to weather a prolonged closure? You must question how much risk you’re comfortable with and how much insurance you need.
  • Use stress tests: Team up with managers from all your departments and make a list of operations. It's a good idea to check for weak points that could hurt your business.

What Does Business Interruption Insurance Cover?

If your business must close due to a covered loss, you’ll be reimbursed for the revenue that you would earn during the closure. The insurance company must use your financial records so make sure they’re accurate and up to date to receive full compensation. This is especially important for growing businesses whose revenue increases each year. Another bonus that comes with business interruption insurance is coverage of fixed expenses like rent or electricity. Typically 23 percent of all sales go toward operating costs and even though your business is closed, you’ll still owe monthly bills.

Instead of eating into your profit, this coverage can help pay for those bills. If you’re comparing policies, make sure to look for one that includes extended coverage. Some policies will only include a few days’ worth of coverage when it can take much longer to bounce back. As for covered loss, your business interruption loss rider will mirror what’s in your main policy. If theft isn’t covered, it also won’t be covered by your business interruption policy.

How Much Coverage Do I Need?

Coverage amounts are unique to each business and depend on the amount of revenue a company generates. How much money would be required to pay the bills if you were shut down for two days? What about two weeks? Even two months? It’s also dependent on risk. Check on how long recovery times are for businesses that have experienced common threats in your area.

You should also consider your employees. If you want to keep them on payroll while your doors are closed, you must include that within your coverage amount. Speaking with an independent agent is a good way to estimate how much business loss insurance you might need and how the business interruption insurance claims process works.

How Much Does Business Interruption Insurance Cost?

Cost varies wildly. One policy could cost $750 while another may cost $10,000. It really depends on the size of the business you have. If you need a large amount of coverage, your premium will be much higher than someone that doesn’t need as much. Additionally, risk always plays into premium amounts. A business in Tornado Alley or on the coast may have much higher premiums because of the risks in that location. There may also be different rates assigned to you based on the type of business you run.  For example, a restaurant might pay more for insurance than a shoe shop because it has a higher risk of fire.

Putting Business Interruption Insurance in Place

If you want to find affordable rates for comprehensive coverage, contact an independent agent in the Trusted Choice network. Unlike “captive” insurance agents who work for one company, an independent agent has access to numerous business interruption insurance companies and policies. Sure, it’s easy to get business interruption insurance quotes online, but when you work with an independent agent, you receive personalized coverage. It’s easy to get started by contacting an independent agent today.

Now, who's ready to get their insurance problems solved?