Imagine if a wildfire worked its way dangerously close to your place of business. Or what if a heavy snowstorm caused you to shutter your doors for several days? When major disasters strike, property damage isn’t the only risk business owners need to worry about. You also need to consider how the loss in revenue during a forced closure can affect your bottom line.
That is why business interruption insurance exists. These policies can help your business stay afloat financially if you must remain closed for an extended period due to damage caused by a covered event. A local independent insurance agent can help you find a good policy at a competitive price.
What Is Business Interruption Insurance?
Business interruption insurance, which is also called “business income insurance” by some providers, is designed to provide your company with a continuation of income during the times that it is forced to temporarily close down while repairs are made following a covered event like a fire or a severe storm.
These funds can enable your business to continue paying regular expenses such as rent or mortgage payments, loan installments, and employee salaries without experiencing a large financial loss.
How Much Does Business Interruption Insurance Cost in Colorado?
The cost of business interruption insurance can vary from one firm to the next. This is because prices are calculated according to a few different factors such as:
- The type of business you own and the industry it operates within
- The weather risks where your company is situated
- Your company’s average monthly revenues
- Your company’s average regular monthly expenses
- The value of any equipment and machinery your business may own or rent
Severe weather risks in Colorado are not as significant as in many other parts of the country, so rates in this state are a bit lower than average. In general, small business owners 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 Colorado?
Businesses in Colorado may be forced to close temporarily following covered events like wildfires, accidental fires, electrical storms, windstorms, and snowstorms.
Business interruption insurance can replace the expected revenues your company would have made if it had been able to remain open. Your policy is likely to provide enough compensation to enable your business to pay regular monthly expenses including:
- Mortgage or rent payments
- Commercial loan installments
- Regular payments on revolving credit
- Employee salaries and wages
- Extra expenses such as if you need to rent a temporary workspace or a storage unit while your business is being repaired
- Relocation costs if the damage is severe enough that you need to move your business operations to an entirely new location
- Training costs if you need to train your employees on the use of new equipment or machinery before you can reopen
- Business taxes so that your company is not hit with late fees and penalties
In addition to covering your regular expenses, your business interruption insurance policy may also reimburse your company for lost potential profits. The amount of compensation provided is determined according to 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 a business interruption insurance policy can do for your company in the wake of a disaster.
What Is Not Covered by Business Interruption Insurance in Colorado?
It is important to be aware that business interruption insurance does not cover everything. Some things you can expect to be excluded from your policy’s coverage are:
- Floods and earthquakes: Unfortunately, business interruption insurance only provides compensation for closures that are the result of events that are covered by your commercial property insurance, and floods and earthquakes are almost always excluded from this coverage.
- Unreported income: When receiving compensation for lost profits, do not expect to be covered for any income that is not documented in your company’s official financial records.
- Utilities: Although utility payments are a regular monthly expense, most insurance companies exclude this from their coverage because your business will not be using utilities at the same level whenever it is not operating as it normally does.
- Communicable diseases: This is something that many business owners learned the hard way in 2020 when the COVID-19 pandemic forced many businesses to shut down or operate at a lower capacity.
- Broken or damaged property: These losses are covered by your commercial property insurance.
Learn more about what your business interruption insurance will and will not cover by consulting an independent agent near you.
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What Is the Indemnity Period for Business Interruption Insurance?
Your business interruption insurance policy’s indemnity period refers to the length of time that benefits will be payable to your company following a covered event.
The indemnity period usually starts on the date that the covered disaster occurred and ends when your business is brought back to the same condition it was in prior to the event. Many policies require a waiting period of 2 or 3 days before coverage can begin, which means that small problems that can be fixed in a day or two usually aren’t covered.
Most business interruption insurance policies provide businesses with anywhere from 30 to 365 days of coverage. In some cases, you may be able to purchase endorsements that allow for more than one year of coverage, though many small businesses do not find this necessary.
What Is Contingent Business Interruption Insurance?
Contingent business interruption insurance (sometimes referred to as “CBI”) is similar to business interruption insurance but 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 that are the result of disasters that impact third parties that your business relies on for revenues.
Let’s say you own a specialized retail store and the supplier of the goods you sell experiences a shutdown of their manufacturing plant due to an explosion. Your store experiences a significant loss of revenue due to a lack of inventory.
Or say you own a manufacturing plant and one of the vendors you rely on for production materials is temporarily shut down due to damage caused by a tornado. This can drastically hinder your operations if an alternative vendor cannot be found quickly.
These are examples of times that a contingent business interruption policy would be needed to prevent your company from experiencing large financial losses.
How Can You Find the Best Business Interruption Insurance in Colorado?
When you are looking for an ideal business interruption insurance policy for your company, look no further than a local independent agent. These experienced professionals are available to explain your various options, answer your insurance-related questions, and provide you with a selection of customized quotes that you can review together.
There are more than 250 independent agents in Colorado. Contact an insurance agent with an office near you to discover how easy it can be to find the best and most affordable policies for all of your business’s coverage needs.
TrustedChoice.com Article | Reviewed by Jeffrey Green
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