On average, 44 tornadoes touch down in Alabama every year. If you are a business owner and your company is in the path of a twister, property damage isn’t the only expense you need to worry about. If the damage is severe, your business may need to shut down for several weeks while repairs are made.
Forced closures can be especially hard on small businesses that don’t have a lot to fall back on. Fortunately, you can get coverage against this risk by purchasing business interruption insurance. Talk to an independent insurance agent near you for help finding a suitable policy.
What Is Business Interruption Insurance?
Business interruption insurance, which is sometimes referred to as business income insurance, is designed to provide your company with a continuation of income if it is forced to temporarily close for repairs following a covered event like a fire or a severe storm.
It can also cover closures that are the result of civil authority, such as if the government mandates that the road leading to your business remain closed for an extended period
How Much Does Business Interruption Insurance Cost in Alabama?
The cost of business interruption insurance can vary from one company to the next. Costs are calculated according to a few different factors such as:
- The type of business you own and the industry you operate in
- The weather risks in the ZIP code where your company is located
- The average monthly revenues generated by your company
- The average of your company’s regular monthly expenses
- The value of the equipment and machinery your business owns or rents
In general, small businesses tend to spend between $500 and $1,500 a year for their coverage, while larger companies pay significantly more.
What Does Business Interruption Insurance Cover in Alabama?
Businesses in Alabama may be forced to close temporarily following covered events like accidental fires, tornadoes, hurricanes, tropical storms, windstorms, and electrical storms.
This insurance can replace the expected revenues your business would have made had it been able to remain open so that you can continue to pay:
- Mortgage or rent payments for your business space
- Commercial loan installments if you have any business loans taken out
- Employee salaries and wages
- Extra expenses such as if you need to rent temporary storage or workspaces while your business is being repaired
- Relocation costs if the damage is too severe and you need to move your business operations to a new location
- Training costs if you need to train your employees on the use of new equipment before reopening
- Business taxes so that your company is not hit with late fees and penalties
In addition to covering your regular expenses, business interruption insurance can also reimburse your company for lost profits. The amount of compensation will typically be based on the average profits earned by your company in the months just prior to the incident.
Talk to a local independent insurance agent to learn more about what business interruption insurance can do for your company.
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What Is Not Covered by Business Interruption Insurance in Alabama?
It is important to be aware that business interruption insurance has its limitations. Some things that may not be covered include:
- Broken or damaged property: This is covered by your commercial property insurance.
- Flood damage: Unfortunately, business interruption insurance only covers damaging events that are covered by your commercial property insurance, and floods are almost always excluded from this coverage.
- Unreported income: If income is not documented in your company’s official financial records, don’t expect to be compensated for not receiving it.
- Utilities: This is excluded because your business will not be using utilities at the same level when it is not operating as it normally does.
- Communicable diseases: This is the big one that many business owners learned the hard way in 2020 when the COVID-19 pandemic forced many businesses to shut down.
Learn more about what your business interruption insurance will and will not cover by talking to an independent insurance agent with an office near you.
What Is the Indemnity Period for Business Interruption Insurance?
The business insurance indemnity period refers to the length of time that benefits will be payable by your business interruption insurance policy following a covered event.
This indemnity period typically begins on the date that the covered disaster began and ends when your business is brought back to the same condition it was in prior to the damage. Some policies require a waiting period of 2 or 3 days before coverage can begin, which means that for small problems that can be fixed quickly, coverage may never kick in.
A standard business interruption insurance policy will provide your business with up to 30 days of coverage, but most insurance companies will allow you to purchase endorsements that can extend this coverage for up to one year.
What Is Contingent Business interruption insurance?
Contingent business interruption insurance, or “CBI,” is a type of business interruption insurance with one key difference: Instead of covering business income losses that result because of a disaster that impacts your business, it covers against indirect losses due to disasters that impact third parties that your business relies on for revenue.
Let’s say you own a manufacturing plant. If one of the top vendors you rely on for production materials is temporarily shut down due to damage caused by a tornado, this can force your business to temporarily halt operations if an alternative vendor cannot be found quickly.
Or let’s say you own a business along Alabama’s Gulf Coast and the bulk of your revenue comes from tourists who are there to enjoy the sandy white beaches. If the beaches are shut down by a disaster like the BP oil spill of 2010, businesses like hotels, restaurants, and entertainment venues are likely to experience a steep drop in revenues as a result.
These are examples of times that a contingent business interruption policy would be needed to provide compensation.
How Can You Find the Best Business Interruption Insurance in Alabama?
When you are looking for the right business interruption insurance policy, look no further than a local independent agent. These experience insurance professionals can explain your various options, answer your insurance-related questions, and provide you with a variety of customized quotes that you can review together.
There are 335 independent agents in Alabama. Contact an insurance agent near you to discover how easy it can be to find the best and most affordable coverage for your business.
TrustedChoice.com Article | Reviewed by Jeffrey Green
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