There are many different coverages in commercial insurance and business interruption insurance is one coverage that can often be overlooked. What is business interruption insurance? What does business interruption insurance cover? Do you actually need business interruption insurance, or is it something you can just forego? The short answer is you need business interruption insurance! In the event of a direct damage insurance claim that results in your business not being able to operate, business interruption insurance provides coverage for loss of income and associated expenses incurred to resume operations.
What, exactly, does business interruption insurance cover?
Business interruption insurance, like most kinds of insurance, varies based on your needs. The main forms of business interruption insurance are:
- Earning
- Profits
- Rental Income
- Extra Expenses
These could also include costs associated with new training that becomes necessary due to the closure/repairs, and the costs associated with opening temporary locations while your existing premises is being repaired.
Earnings
One common form of Business Interruption coverage is Gross Earnings insurance. This type of coverage insures the loss of revenue and the continuing expenses resulting from direct damage to your business property. The insurer will continue to pay until operations resume, subject to the limit of insurance and the period of indemnity.
Profits
This type of business interruption insurance provides coverage for the loss of revenue and continuing expenses resulting from direct damage to your insured property. Profits coverage continues from your insurer until your business returns to the pre-loss level of profit, subject to the limit of insurance and the period of indemnity. This is a broader form of coverage than Earnings. Coverage can be tailored to increase the length of the period of indemnity as well as respond to seasonal fluctuations (peak season).
Rental Income
Rental Income coverages responds to the loss in revenue directly from what you would be earning in rent payments. If you own property that you rent or lease, and that property is damaged such that it cannot be tenant occupied, Loss of Rental Income coverage will replace the lost income you would otherwise receive from tenants.
Extra Expenses
This insurance protection covers the reasonable expenses you may incur from having to operate from a temporary location while you cannot operate from your normal location. This could be in the form of leasing temporary space, re-routing phone lines or purchasing laptops to send your employees to work from home while your space is being repaired.
Fixed Costs
Fixed costs protection covers the expenses that are still being incurred by the property, including operating expenses. This is based on your historical overhead costs. Costs like rent payments, leases on equipment, subscriptions to digital platforms that you need to use for your business, etc.
Plans for business interruption insurance can be customized for your business’ unique needs. Our commercial insurance brokers will be able to you with the proper coverage based on your needs that will give you peace of mind should something were to happen to cause your business to shut down. We will also help you understand what your policy covers, and what is and is not included as part of your policy.
Talk to a commercial insurance broker at Sadler Insurance today to learn how we can create a customized business interruption insurance plan for your business!
