Why Do Contractors Need Business Interruption Insurance?
In recent years, we’ve seen firsthand how interruptions can devastate industries worldwide. The construction industry has been especially at risk, particularly due to the fact that it depends upon a large chain of different manufacturers, carriers, and laborers in order to do work. Due to closures and stay-at-home orders throughout the pandemic, many construction businesses saw unexpected and even catastrophic losses. Moreover, some contracting businesses were forced to shut their doors – for good – as the challenges proved too much to bear.
Business interruption insurance for contractors is designed to protect construction businesses and contractors. It compensates them for lost revenue as a result of an unexpected closure due to natural disasters and other devastating events. This coverage is not a separate policy in and of itself, but an extension that can be included under an existing commercial property insurance policy.
In this blog post, we break down why contractors need business interruption insurance, what business interruption insurance is, and several of its key benefits.
What is Business Interruption Insurance?
What is business interruption insurance for contractors and what does it do? As previously mentioned, business interruption insurance is designed as reimbursement for your business’s loss of income during a period of unexpected downtime as a result of an insurable loss. It sits on top of your existing business owner’s policy, so you cannot purchase it stand-alone.
Business interruption insurance for contractors can include these lost costs:
- Lost revenues
- Rent/lease payments
- Relocation costs
- Loan payments
- Utility bills
- Employee wages
These losses will only be covered up until a specific limit, and coverage ceases as soon as your business is ready to reopen following repairs and/or restoration. You may opt to increase your coverage depending on your needs for additional premiums.
Note that there has been some debate over whether COVID-19-related losses would be covered by business interruption insurance. Depending on the wording of your business interruption insurance policy, you may or may not have coverage. Most standard policies will specifically exclude infectious diseases from coverage. Moreover, losses caused by civil authority actions are typically not covered.
However, as insurance companies (and the world) learn more about coronavirus, there has been active response and alterations. Some insurance companies have declared that they will provide business interruption endorsements, where coronavirus-related losses are insurable. Discuss with your Hitchings Insurance professional if you aren’t sure if your endorsement covers a specific loss.
The Benefits of Business Interruption Insurance for Contractors
Running a contracting business is never easy. There are a lot of things to do, including meeting deadlines, satisfying client expectations, and keeping up with the competition. You’re the heart and soul of your business, and you’ve got to keep it running. So where does business interruption insurance for contractors factor into all of this? There are a lot of reasons why a contracting business would need business interruption insurance. Here are some of the benefits.
The ability to recover faster.
Even if you had the money and resources to recover from a disaster, the time it would take you to do so can be devastating to your work. Business interruption insurance will cover a standard number of perils, including such things as burst pipes, vandalism, theft, and even explosions. Prolonged downtime can result in serious financial losses without business interruption insurance. For contractors, not being able to carry on with work, as usual, can spell disaster.
Retain your peace of mind.
We don’t do our best work when we’re too worried about the unknown. A proper business owner’s insurance policy, complete with business interruption insurance specific to contractors can help us work with peace of mind, knowing we’re protected if disaster should strike. Business interruption insurance for contractors doesn’t stand on its own, either. It’s an addition to your existing business insurance policy and can help you fully protect all your firm’s assets.
Retain your employees after an accident.
Most versions of business interruption insurance will reimburse your business for additional items that you would be unable to pay during a period of downtime, such as rent, bills, and yes – even employee payroll. This will allow you to retain your valuable employees and not have to worry about having to retrain and rehire once your business is given the “go ahead” to reopen.
The Cost of Business Interruption Insurance for Contractors
Business interruption insurance is an endorsement, not a standalone policy, so you will have to pay additional premiums for this specialized coverage on top of your existing commercial property and liability coverage. The cost of business interruption insurance for contractors varies based on your industry, its revenue, the overall value of your property, outstanding risk factors, and more.
Bottom line: if you operate a small and relatively low-risk construction business, you’ll pay less than if you owned a much larger business in a high-risk industry. Business interruption insurance may cost your business an average of between $50-$150/month, but – again – can range depending on the variables that make up your business. The best way to gauge your overall costs is to get a quote with Hitchings Insurance Agency and go from there.
Personalizing Your Business Owner’s Policy with Business Interruption Insurance for Contractors
Whatever your contracting business specializes in, business interruption insurance for contractors is never a bad addition to have in place. For a slight added premium, this endorsement provides great coverage and peace of mind should your business ever need to close unexpectedly. As with recent unpredictable events like a pandemic, it’s important for your business to review its existing coverage – even with the help of a professional from Hitchings – to establish whether your coverage reflects your needs, your growth, and even your future goals.