What Is Business Interruption Insurance?
Business interruption insurance is a business insurance policy that reimburses you for business income lost due to an unforeseen event that causes physical damage to the business. Without business interruption insurance, business owners are out of luck if their business is temporarily closed down due to theft, fire, or some other disaster. If your business suffers any kind of loss due to damage, business interruption insurance covers the business income lost during the time it takes to restore operations. This insurance is something every business owner needs. It’s a misconception that business owners need only property insurance or liability coverage, without business interruption insurance. Not having business interruption insurance means if your business has to shut down for any length of time, you take a business income loss while the business is down. If your business is closed for weeks or months while you rebuild, you not only lose income during that time, but business interruption insurance does not cover any future business income lost after the restoration of operations.
Business Interruption Insurance Coverage
The types of events business interruption insurance covers vary by policy and business. For instance, business interruption insurance may cover losses due to business interruption due to business equipment failure or business interruption due to business operation disruption caused by a shutdown of the power grid. The event that causes loss might be something like a fire or flood, or it might be an intentional act such as terrorism.
Why Do You Need Business Interruption Insurance?
The business interruption insurance covers business income lost during the time it takes you to rebuild your business after a property loss. However, it also does not cover business interruption if the property loss is due to the business owner’s intentional act. If your business has an income stream and physical assets, business interruption insurance provides coverage that can be indispensable in times of business crisis. Business owners can’t afford to lose business income during this period of time, so without business interruption coverage, they have no way to recover these losses.
How to Get Business Interruption Insurance?
Business owners should ask business professionals working in business insurance, business finance, and business development for a business interruption insurance quote. Business interruption insurance is not something to take lightly, so business owners need to get quotes from several different providers. They should also be sure to ask questions about how business interruption claims are paid out.
Who Can Use Business Interruption Insurance?
Business interruption insurance is something business owners need. Everyone has different business insurance needs, but business interruption coverage is especially useful to business professionals who can’t afford to take a business income loss if their business suffers some kind of damage.
Different Types of Business Interruption Insurance
There are two main types of business interruption insurance policies business owners can purchase.
Business Income Insurance
This covers business income loss during the time it takes to rebuild after a property loss. It’s helpful for business owners who can’t afford business income loss during the rebuilding phase and also business owners who want to be covered against business interruption resulting from a business equipment failure.
Business Operating Expense Insurance
This type of business interruption insurance covers business operating expenses such as rent, utilities, and other business operation costs if business operations need to be suspended for business property damage repairs. It can be a business necessity if the business interruption is caused by business equipment failure or business operation disruption due to a power outage.
Business Revenue Insurance
This insurance compensates business owners for business lost due to theft or any other intentional act by others. For business owners who want business interruption coverage in case of business equipment failure or business operation disruption due to a power outage, business revenue insurance is available for this type of loss.
Business Interruption Insurance Drawbacks and Benefits
There are some drawbacks and benefits associated with business interruption insurance:
- It sometimes includes a deductible which business owners must pay out of pocket before business interruption insurance starts
- If the business interruption is not caused by a business property loss it will not be covered by business interruption insurance
- Can cover business income lost during the business repair time frame, business operating expense loss if business operations are suspended, and business revenue lost due to theft or any other intentional act by others
- It can make business owners feel better knowing they are protected in case of business equipment failure or business operation disruption due to a power outage
- If business interruption claims are paid out correctly, business owners don’t need to worry about business income loss during the time it takes them to rebuild their business after a property loss.
- It also provides business owners with protecting their business from risks such as business interruption due to any intentional act by business professionals, such as terrorism or sabotage.
Business interruption insurance is business coverage that business professionals need to make sure business owners are protected in case of business equipment failure or business operation disruption due to a power outage. To get business interruption insurance quotes business professionals will have to talk with different providers and ask questions about how business interruption claims are paid out.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.