Mother Nature isn’t too concerned with your business. Unexpected things can happen at any time. Luckily, you can protect all your hard work with Business Interruption Insurance. Don’t let Mother Nature dictate if your business doors will open again. Take control with a Business Interruption Policy.
What Is Business Interruption Insurance?
According to the Insurance Institute for Business & Home Safety, more than 25 percent of businesses that close after a disaster never reopen. Why is this? This happens because these operations failed to prepare for when their business' operations are interrupted.
Business Interruption Insurance protects your business when a disaster strikes or an unexpected situation forces you to close up shop. Common disasters that could interrupt your operation include:
- Hail storms
- Major construction in front of your business
A tornado ripped through your town with ferocity. You were aware that your company isn't located in "Tornado Alley" – it's not even close. With this knowledge, you decided not invest in any disaster coverage. Your logic for this decision was that one of your other insurances would cover a catastrophe. This thinking was flawed.
Lost profits, fixed costs, temporary location expenses, and more were not covered. Now, you are not sure if you can keep the company afloat until business returns to normal.
If you are a business owner and have dreamed of passing your business to your children, you must prepare for the worst-case scenario. Always be proactive, not reactive.
Who Needs Business Interruption Insurance?
All business owners need to have Business Interruption Insurance, but some need it more than others. If your business is located in a historically extreme weather location, then you know what the weather can do. No matter how confident you are in your insurance portfolio, Business Interruption Insurance offers peace of mind and total coverage when disasters occur.
Think about the potential costs of having to close your doors for an extended time. This means paying employees who aren’t working, destroyed products, lost profits, temporary location costs, and fixed costs, among others.
What Is Covered in Business Interruption Insurance?
Business Interruption Insurance, also called Business Income Insurance, is coverage designed for when a company needs to close its doors after a disaster or unexpected circumstances. This coverage is also useful to unlucky businesses when the city closes their street for major road construction.
Typical costs covered:
- Fixed Costs: These are the daily operating expenses as well as utilities, such as water, heating, and cooling.
- New/Temporary Location: Often, the physical damage to a building is severe enough that it is unsafe to work there. This policy pays for a new or temporary location so that you can continue running your business until the previous location is repaired.
- Profits/Commissions: Profits and commissions that your business would have earned can be recouped, but do not think that you can tell the insurance company inflated numbers and expect to get paid. You must provide two to three years of business taxes and/or monthly bank statements to estimate the amount to pay.
- Training Costs: When a business is completely destroyed and rebuilt at a later time, all your previous employees may not return. When this happens, it costs money to train new hires.
- Civil Authority Ingress & Egress: The government or city can enact a mandated street curfew or close a road. If this happens, customers must drive further, potentially leading them to your competitors. This may impact your business profits significantly.
- Period Of Restoration: The period of restoration starts the moment the loss occurs and ends when your business is repaired.
- Extra Expenses: During the period of restoration, extra expenses can arise, such as when a business has to pay for extra items that are not normally needed. The insurance company expects the business owner to prevent any additional damage during this time. If an owner has to buy boards to nail over windows that sustained no damage, then these costs must be incurred.
What Does Business Interruption Insurance Not Cover?
Although Business Interruption Insurance is a solid policy, it was not designed to cover everything. Items not covered include:
- Falsified tax and bank statements
- Fake payroll amounts
- Profits if a business is failing on its own
- Items that are broken after the disaster
How Much Does Business Interruption Insurance Cost?
Costs for Business Interruption Coverage vary due to business size, nature of the business, amount of coverage, and how it is classified by the insurance company. The insurance industry has thousands of classification codes, and every business falls into one of these.
For example, a large business in "Tornado Alley" may need a policy that costs $10,000. A small business located in an area unlikely to be struck by a natural disaster may only pay $750 for a policy. However, the national average cost for Business Interruption Insurance is $1,200 annually.
Some insurance coverages can be intimidating or confusing. Business Interruption Insurance doesn’t need to be. If you are a business owner, consider this policy for peace of mind. This coverage offers relief when disaster strikes, a time when companies need it most.