The Ultimate Guide to Business Interruption Insurance

August 29th, 2019

Inscription on a door: Sorry we are closed. Conceptual photo or table on door with information of work. Announcement or work schedule.

If your business is forced to stop operations due to circumstances outside of your control, it can be financially devastating. Business interruption insurance can help your business when it needs it most, whether it’s making it through a forced closure or recovering after one. Natural disasters, mandatory evacuations, and insurance claims are hard enough already – keep your business going with business interruption insurance.

How can business interruption insurance help?

Business interruption insurance is a type of coverage which supplies protection from financial losses due to compulsory closures. It can sometimes be referred to as business income protection, out-of-business coverage, and profit protection.

If you’re forced to close, you lose your income but your expenses don’t stop. You still need to pay your rent, your utilities, your suppliers, and your employees. A closure can greatly impact your ability to make these payments. With business income protection, this difficult time will be made easier.

When can you use business income protection?

Business interruption insurance can be evoked when there is a forced closure of your business, such as these following scenarios:

  • Mandatory evacuation order
  • An insured claim
  • Civil authority denying access (such as if there was a fire in your office building)
  • A contingency that impacts your ability to operate
  • Injury to owner or employees halting business

Not every business income protection policy will cover all of the above-listed scenarios for every business. It’s also important to keep in mind that you may not receive reimbursement to get your business operating to the level it was before the catastrophe. Usually, your policy is there to help you get back on your feet – providing your service or selling. The exact length of time you’ll be eligible for business interruption will depend on your policy.

What costs are covered with business interruption insurance?

The costs may vary depending on your insurance company and how this policy interacts with your business or commercial property insurance policy. Most business interruption insurance policies will include:

  • Lost profits
  • Operating expenses
  • Temporary relocation costs
  • Additional training costs
  • Reasonable extra expenses

How is the income determined with business interruption insurance?

Generally, your business income is the gross profit of your business. This is evidenced by historical records of sales and expenses. However, each individual insurance company may have a different way of calculating the amount.

What’s the difference between business interruption insurance and commercial liability and property insurance?

Commercial liability insurance covers you in the event a third party is injured or has their property damaged while on your business premises. Commercial property insurance would cover your business’ physical building, inventory and other assets in the event they were destroyed or damaged (so long as the damage was caused by something you’re insured for). Neither policy would cover your lost income during the time of recovery.

This is where business insurance becomes important. It can help pay for the company’s ongoing costs, like utilities, taxes, rent, and payroll.

Contact your Rogers Insurance professional insurance broker for a business interruption insurance quote today.

Blog Author: Gabrielle Reid

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