Business interruption or loss of business income is coverage to help a business replace lost income after there is a covered loss, like property damage.
If you experience a property loss that does not allow you to operate your business for a period while you restore your property, business income helps you recover your lost revenue until you can operate again.
Business Interruption coverage is added as an endorsement to your business owner’s policy or general liability package. It is usually not purchased as a separate policy.
What is covered
If a covered loss forces your business to shut down, business interruption will help you cover your operating expenses including, but not limiting
- Mortgage or rent payments
- Relocation costs- if you have to set up a temporary location
- Lost Revenue
How is Business Interruption Calculated
To make it easier for consumers, most business owner’s policies offer coverage in terms of time frame rather than dollar limits. Typical business interruption coverage will extend for 6, 12, or 18 months.
If a claim arises, insurance companies will calculate what to pay for lost revenue based on your business history. They will review revenue from a similar time period and pay off that calculation.
Any undocumented income that is not included in your business financials will not be included.
Like all insurance policies, there are exclusions. It is important to read those exclusions to get familiar with what is and isn’t covered.
The important part of this coverage is that it is afforded when there is coverage for a direct physical loss to a covered property such as buildings or business property, leading to the cessation of business operations.
If something is not covered under your business owner’s policy then the business interruption coverage does not apply.
An example of this is Virus’s & Bacteria which is excluded from most standard business owner’s policies.
Another example is Flood, your business owner’s policy does not have coverage for Flood. Flood Insurance is a separate insurance policy so Business Interruption will not kick in from your business owner’s policy.
Running a business can be difficult. The insurance you need and the details of what is covered are extremely important to help maintain your business moving forward.
Having a trusted independent insurance agent will help guide you in protecting your business.
If you don’t have a relationship with an agent or want a review of your insurance?
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