What is Business Interruption Insurance? Covers and Costs

Business Interruption Insurance

What is Business Interruption Insurance?

Business Interruption Insurance compensates for lost net income as a result of an insured property loss. In addition to replacing lost income, Business Interruption Insurance may also cover the overhead expenditures required to keep your business running, such as rent and energy, as well as staff payments.

Business Interruption Insurance does not exist as a stand-alone policy. It is usually included in your commercial property insurance policy or can be added as a rider to your existing policy.

What Exactly Does it Cover?

Business Interruption Insurance normally covers coverage for both net income and operating expenditures lost as a result of an insured event. Most policies respond after 12 or 24 continuous hours of business closure.

Some Expenses May be Covered Include:

  • Rent and electricity are examples of overhead running costs.
  • Payments for a mortgage, rent, or lease.
  • We are relocating to a temporary site.
  • Wages and payments for employees
  • Internet and phone service are available.
  • Taxes and mortgage payments

What Does it Not Include?

Business Interruption Insurance does not cover the following items:

  • Terrorism
  • Undocumented earnings (income that is no listed on your financial records)
  • Pandemics, viruses, and infectious diseases are all examples of pandemics (e.g., COVID-19)
  • Damage caused by a flood, an earthquake, or pollution. It’s worth noting that your commercial property policy may cover these occurrences. Please contact your broker to confirm.

How Much Does it Cost?

The cost of Business Interruption Insurance is generally determined by your annual income, with rates starting at $100.

Business Interruption Insurance is often included automatically in a commercial property insurance policy or business owner’s policy (BOP) or added to an existing policy.

Who Requires this Coverage?

All business owners should consider purchasing Business Interruption Insurance as a type of protection against missed income due to an insured loss.

How Long is the Business Interruption Insurance Period?

The indemnity period, which is commonly 12, 24, or 36 months, refers to the length of time for which compensation is payable under a business interruption policy. The indemnity period may be extended in order to give additional coverage beyond the time required to restore your business (restoration period)

How is a Business Interruption Claim Calculated?

The method of calculating payout will differ depending on the type of Business Interruption coverage used. Most policies provide repayment for profits your business would have earned based on previous month’s performance, as well as extra expenses above and beyond set costs. Employee salary, taxes, and loan payments may also be considered.

Does Business Interruption Insurance Cover Pandemic?

Standard business interruption insurance covers losses incurred as a result of direct physical loss or damage, such as a fire. Unfortunately, it will not cover lost income or trade and travel impediments caused by a pandemic, contagious disease, or government-mandated closure.

Is Business Interruption Insurance Available Separately?

Business Interruption Insurance is frequently included in a commercial property insurance policy or a business owner’s policy (BOP). You can add it as a rider to an existing policy.

Read Also: What is Business Insurance?

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