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.

  1. Profits – Based on prior months’ performance, a policy will provide reimbursement for profits that would have been earned had the event not occurred.
  2. Fixed Costs – These can include operating expenses and other incurred costs of doing business.
  3. Temporary Location – Some policies cover the costs involved with moving to and operating from a temporary business location.
  4. 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.
  5. 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. 
  6. 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.
  7. 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.
  8. 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.
  1. Broken items resulting from a
    covered event or loss (such as glass).
  2. Flood or earthquake damage, which
    are covered by a separate policy.
  3. Undocumented income that’s not
    listed on your business’ financial records.
  4. Pandemics, viruses, or
    communicable diseases (such as COVID-19).
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