Most of the time, your business operations will continue day after day. But what happens if they come to a sudden halt for reasons you cannot predict or control? In this situation, business interruption insurance can help you recover some of your losses.
What Is Business Interruption Insurance?
Business interruption insurance works hand-in-hand with other types of insurance such as property insurance. It often comes as a bundle with a Business Owner’s Policy, also known as BOP. The BOP frequently includes general liability and property insurance. Although a BOP is not well-suited for high-risk companies, it can be reasonable for those that are at low-risk of unexpected closures.
When does business interruption insurance come into play? Consider this scenario: You experience a fire at your business, whether it happens through a naturally occurring accident or arson. Your property insurance will cover some equipment and furnishings. However, property insurance does not cover operational losses like income. Lucky for you, though, business interruption insurance does.
In essence, business interruption insurance bridges any gaps in coverage. Without it, you would otherwise have to pay for any operational losses out of pocket after a tragedy and during the restoration phase when your business recovers.
What Does Business Interruption Insurance Cover?
Business interruption insurance can cover numerous operational aspects of your business that are directly related to your loss. These can include:
- Profits that would have come into your business. As you might guess, you would need clear proof of the profits you expected. Therefore, you should keep very detailed historic records, as well as signed purchase orders.
- Lease or rent to maintain the damaged real estate or property. Even if you cannot work on the property site, you will probably have to pay the landlord or bank your monthly rent. Business interruption insurance helps you cover this cost. It can also help with any loan payments if you lease equipment, furnishings, etc.
- Payroll wages for staff who would have worked. Again, you should have clear evidence of how much you would have paid people who would otherwise be in the office or establishment. Being able to pay your team members serves to keep them from leaving and going to another business.
- Taxes owed to the government. The government still holds you accountable for paying your taxes, even if you experience a disaster. Monies from business interruption insurance can go toward paying them.
- Moving expenses to relocate temporarily. Some business interruption events are quite extensive. If you should need to completely move your operations to a different place, business interruption insurance may cover everything from hiring movers to the rent you will owe your new landlord.
What Would Not Be Covered by Business Interruption Insurance?
A business interruption insurance policy definitely covers a lot of operational expenses. Still, not all expenses are eligible. For instance, if your disaster is not covered by property insurance, it will not be covered by your business interruption insurance.
In addition to non-covered damages, business interruption insurance typically does not apply to utilities, undocumented income, partial closure loss or power line-related closures.
Get a Business Interruption Insurance Quote in PA
Want to know how much business interruption insurance would be for your company as part of your BOP? Contact Strock Insurance today for a free quote.
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