Business Interruption Insurance – When You Need It and When You Don’t

Most businesses protect themselves with insurance policies to cover disasters like fires, flooding, or earthquakes. However, while that basic insurance coverage will provide for repairs to the building or property, those repairs may take days to weeks to months and a lot of revenue will be lost during that time. There is an insurance policy that can provide business funding to a company recovering from a disaster. It’s called business interruption insurance.

What is Business Interruption Insurance?

Business interruption insurance covers the loss of a firm’s income as a result of a disaster. It typically covers things like business profits that would have been earned, any fixed costs still being charged while the property is repaired, the cost of a temporary location, and any extra expenses incurred in the interim period. Business interruption insurance is generally tacked on to other, more basic insurance policies.

When You Need Business Interruption Insurance?

This type of insurance is particularly useful to businesses who live in zones where natural disasters occur frequently, like the Gulf Coast for example, where hurricanes often cause major damage. While businesses are rebuilding, it can give them the funding they need to continue operating in the meantime.

It is also helpful for companies that have an inherently high risk of disaster. For example, businesses that operate electrical machinery constantly and even restaurants are at much higher risk of fire than other industries.

Business interruption insurance can also provide valuable funding and protection to businesses that would have a very difficult time operating away from their own location, like restaurants or beach-related establishments, and any of those with large industry-specific equipment.

When You Don’t Need Business Interruption Insurance?

If your business does not reside in an area prone to natural disasters, can easily operate from other premises and has no inherent risks, this type of insurance is not as likely to benefit your company.

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