If you run a tight ship with commendable organization and business practices, there are still forces outside of your control that could financially damage your small company. Business interruption insurance can step in and help cover the costs if you have to shut down due to an issue specified in your policy.
For example, say a nasty storm knocks a tree into your building and you need to close for a week (or longer) for repairs. How would you replace your lost business income?
Fortunately, the best insurance plans have coverage for these types of situations. Here’s how to get business interruption insurance.
Business interruption insurance policy helps with a business's operating expenses due to an event that is covered by the policy. The typical events that are covered under business interruption insurance are theft, wind damage, fire, lightning and debris falling.
Covered operating expenses may include:
- The revenue your business would make if it were open for business
- Monthly mortgage, lease and rent payments for the business space
- Loan payments for the business
- Relocation costs if you have to move to a temporary location
- Training costs for employees to learn new equipment
There are plenty of exclusions to a business interruption insurance policy, such as:
- Damage from a flood or earthquake. Both require separate insurance policies.
- Undocumented income that’s not listed in your financial records.
- Utilities, because they are usually shut off when a business is under repair.
- Closure caused by communicable diseases.
- Damaged property, which would be covered under commercial property insurance.
Most business owners can benefit from having business interruption insurance, but for businesses that rely on a physical location or certain assets, it is an essential type of coverage. This protection covers problems such as fire, theft and damage caused by weather conditions like wind and lighting.
Typically, a business interruption insurance policy has a limit on coverage. This is the maximum amount your insurance company will pay toward a business interruption claim. Because you'll have to cover the expenses yourself, it's crucial to get as much coverage as possible.any financial losses above your coverage limit.
Consider these factors:
- How long would it take to get the business up and running after a disastrous problem like a fire?
- Are the security and fire alarms for your business up to date?
- How much would it cost to rent new office space in your area, and is space readily available?
- Look at your gross earnings and earnings projections as guidelines for the right amount of coverage. You want the insurance to cover the costs of operating expenses while repairs are being made to the business.
Our brokers at Summit Commercial Solutions can help you determine the correct limit of business interruption insurance for your business.
The amount you'll pay for business interruption insurance varies depending on the business. Business interruption insurance is usually a percentage of the business property insurance premium and is based on the business's gross earnings. The business's profit margin, payroll and rent or mortgage payments are also used to calculate business interruption insurance rates.
At Summit Commercial Solutions, we can help you find business interruption insurance that fits your business needs and budget.