Business Interruption
What is Business Interruption?
Business interruption insurance is insurance coverage that replaces business income lost in a disaster. The event could be, for example, a fire or a natural disaster. Business interruption insurance is not sold as a separate policy but is either added to a property/casualty policy or included in a comprehensive package policy as an add-on or rider.
- Profits – Based on prior months’ performance, a policy will provide reimbursement for profits that would have been earned had the event not occurred.
- Fixed Costs – These can include operating expenses and other incurred costs of doing business.
- Temporary Location – Some policies cover the costs involved with moving to and operating from a temporary business location.
- Extra Expenses – Business interruption insurance will provide reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operating while the business gets back on solid footing.
- Civil authority ingress/egress – A business interruption event may result in government-mandated closure of business premises that directly cause financial loss. Examples include forced closures because of government-issued curfews or street closures related to a covered event.
- Employee wages – Coverage of wages is essential if a business does not want to lose employees while shutting down. This coverage can help a business owner make payroll when they cannot operate.
- Taxes – Businesses are still required to pay taxes, even when disaster hits. Tax coverage will ensure a business can pay taxes on time and avoid penalties.
- Loan Payments – Loan payments are often due monthly. Business Interruption coverage can help a business make those payments even when they are not generating income.
- Broken items resulting from a
covered event or loss (such as glass). - Flood or earthquake damage, which
are covered by a separate policy. - Undocumented income that’s not
listed on your business’ financial records. - Pandemics, viruses, or
communicable diseases (such as COVID-19).