What is Business Interruption Insurance & Why Does My Business Need It?

In recent years, we’ve seen firsthand how interruptions can devastate industries worldwide. Just a few weeks of downtime can seriously devastate any business, whether that’s a retail business, a construction business, or an arcade. Due to closures and stay-at-home orders throughout the initial spread of the novel coronavirus, many businesses saw unexpected and even catastrophic losses. Some businesses were forced to shut their doors – for good – as the challenges proved too much to bear. This is where business interruption insurance enters!

Business interruption insurance is designed to protect businesses and individual professionals, as well as compensate them for lost revenue because 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 your business might 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 and what does it do? As previously mentioned, business interruption insurance is designed as reimbursement for your business’ loss of income during a period of unexpected downtime because 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 can include these lost costs:

• Lost revenues
• Rent/lease payments
• Relocation costs
• Taxes
• Loan payments
• Utility bills
• Employee wages

These losses will be only 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. Additionally, losses caused by civil authority actions are typically not covered.

However, as insurance companies (and the world) learn more about the novel coronavirus, there has been active response and alterations. Some insurance companies have declared they will provide business interruption endorsements where coronavirus-related losses are insurable. Discuss with your Hitchings Insurance representative if you aren’t sure if your endorsement covers a specific loss.

The Benefits of Business Interruption Insurance

Running a business is never easy. There are a lot of things to do, including meeting deadlines, satisfying client expectations, and keeping on your toes with competition. You’re the heart and soul of your business, and you’ve got to keep it running. So where does business interruption insurance factor into all of this? There are a lot of reasons why any business might need business interruption coverage. 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 some business owners, 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 what could happen. A proper business owner’s insurance policy, complete with business interruption insurance specific to your business, can help us work with peace of mind, knowing we’re protected if disaster should strike. Business interruption insurance 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, so that you can 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

Business interruption insurance is an endorsement, not a stand-alone policy, so you will have to pay additional premiums for this specialized coverage on top of your existing commercial property and liability. The cost of business interruption insurance 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 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 per 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 and go from there.

Personalizing Your Business Owner’s Policy with Business Interruption Insurance

Whatever your business specializes in, business interruption insurance is never a bad addition to have. For a slightly added premium, this endorsement provides great coverage and peace of mind – should your business ever need to close unexpectedly. Especially after such an event as the novel coronavirus, it’s important for your business to review its existing coverage – even with the help of an agent from Hitchings Insurance – to establish whether your coverage reflects your needs, your growth, and even your future goals.