Do I need Business Interruption Insurance?

There is no doubt that commercial insurance has many complex terms and coverage that  cause some to ask, “Why would I ever need that kind of insurance?”  One term that is not immediately obvious as to its meaning is “Business Interruption coverage”.   and the benefits of having it as part of your commercial insurance package.

Business Interruption Defined

Business interruption insurance is intended to compensate the business for the lost income during the period of restoration, or the time necessary to repair or restore the physical damage to the covered property as a result of a covered loss. For example, if your business suffers a fire that causes your premises to be temporarily unusable, business interruption insurance is designed to help.

What Business Interruption Covers

Typically business interruption insurance can cover:

• Lost income, revenue, or profits you might have earned assuming there was no loss.  Insurance companies use past financial records to determine how coverage will be applied.
• Extra expense can also be part of business interruption coverage. Extra expense can provide reasonable expenses beyond normal operating expenses that allow your business to continue operations, often at another location during the restoration period.

Extra expense can cover:

• Temporary rent
• Utilities at a temporary location
• Expenses needed to move to a temporary location and then move back after repairs are complete

In order to obtain business interruption insurance you must complete a financial worksheet which outlines your current and past financial condition. Your accountant can be a resource to help you complete the necessary information.

All businesses should have a comprehensive disaster recovery plan.  Business interruption coverage is only a part of such a plan.   The disaster plan should include evacuation planning, client notification, key information back-up and having a secondary location selected in advance. These are some ideas to consider.  Give Partners Risk Services a call to get the conversation started.