Business Interruption Insurance Coverage

Most people think of insurance for business and think of the business property, business vehicles, or even the liability risks that are inherent in running a business.  However, they typically do not think of insuring against the downtime that occurs when a business operation goes down due to one of these losses.  The average consumer who buys a company’s products doesn’t notice a cessation in production, companies, and businesses might experience during pauses in production. When a business suffers a loss and can’t perform its business functions then what happens to the people that own and operate the business?  This is where business interruption insurance comes in.

Damages to property and equipment can be devastating for businesses. Property insurance covers the cost of these damages and what it would cost to fix them, but business interruption insurance is there to cover profits expected during the period where the business isn’t active.

For example, if your factory suffers a fire and lots of equipment and machines get damaged, they would be covered by property insurance. The profit you were expected to make during the weeks it would take for these machines to be fixed, however, would be covered by business interruption insurance.

If you’re looking to add a business interruption insurance policy to your business, you probably won’t be able to buy it separately. It can often be added to your property insurance cover or as part of a comprehensive package containing several policies designed to protect your business.

What’s great is that most times, business interruption insurance doesn’t end with the expiration of your policy as long as the damage causing the interruption happened while the policy was still active. For example, if the cause of business interruption occurs in March and business will resume again in June but the policy expires in April, your business will still be covered until it resumes activity again even though it is after the policy expiration date.

Besides profit, a few other things are also covered by business interruption insurance. Fixed costs that you have to pay despite the fact that business is on pause will also be covered by the policy. Additionally, if you transfer to a temporary location while your original factory or company is repaired then business interruption insurance will cover the cost of this relocation. The costs that come with disruption of services like water and power are also covered by the policy. Any additional expenses, beyond the fixed costs, that enable the business to keep operating while repairs are done also fall under business interruption insurance.

In order for the policy to become active, the damage has to be due to actual physical damage, destruction, or loss. In the event that this damage was caused, or even caused, by the insured, then the policy will be nullified. A business owner can’t expect the policy to cover losses resulting from an avoidable issue as this would be taking advantage of the policy.

Business interruption insurance isn’t as common or quite as popular as property insurance, but it can be just as important. While property insurance will cover the cost of repairs and damages, business interruption insurance will cover many operational costs, additional costs to temporarily relocate the operation and most times will also help to cover expected profits during that period of time where the business is at a halt. So, when purchasing property insurance coverage always consider business interruption insurance to your plan in order to get the maximum benefit possible in case an unfortunate event occurs.