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Does your business need business interruption insurance?
Generally, business owners decide to purchase business interruption coverage to reduce their risk from a business shutdown. Many businesses could not afford to continue paying their expenses if operations were shut down for a long period of time. It is not a required insurance for your business to operate, but it creates a valuable safety net that can protect you during a disaster.
Companies that are located in areas of frequent natural disasters, have slim profit margins, maintain expensive hardware, have high salary expenses, or operate in a risky environment should consider business interruption coverage.
How do I purchase business interruption coverage?
Business interruption coverage is most often part of a commercial property insurance policy or bundled with a business owner’s policy for qualified businesses. Business interruption coverage can typically be added as an endorsement on whichever of these policies you are interested in purchasing.
However, to be eligible for business interruption coverage, your business will require a commercial place of operation.
What does business interruption insurance cover?
Business interruption coverage pays for a loss of income and additional expenses when your business is forced to close due to a covered cause of loss. Additional expenses can include employee salaries, mortgage or rent, loan payments, utilities, taxes, relocation costs, temporary operation expenses, and retraining. Coverage of each expense is only in effect during the business interruption restoration period unless otherwise stated within your policy.
If a commercial property claim causes your business to be temporarily unable to serve customers or sell products, business interruption coverage can cover the lost income during your downtime. For example, if a fire causes your auto dealership to temporarily close, business interruption coverage can help recoup lost income while the building is renovated.
Even if your business is temporarily closed, employees still need their salary. Business interruption coverage can cover payroll expenses if your business is shut down and isn’t bringing in any income to pay your employees. For example, if a storm causes damage to your restaurant’s kitchen and destroys operational equipment, business interruption coverage will pay your employee’s salaries while you cannot serve guests.
Mortgage or rent
A mortgage or rent payment doesn’t stop when your business is out of operation. If a covered event shuts down your business temporarily, a business interruption policy can cover mortgage or rent payments that are due during the closure period.
Missed loan payments can cause serious harm to a company’s future success. If loans are owed to financial institutions or other private funding sources, business interruption can help cover payments while operations are suspended within the covered restoration period.
Utility usage may be lower during times of temporary closure, but payment obligations will not go away. Business interruption coverage can cover utility bills due during a shutdown.
If an interim shutdown occurs when quarterly or annual taxes are due, they can be covered by business interruption coverage while your company isn’t generating income.
When there is an option to relocate operations to a new facility, business interruption might provide coverage for moving, setup, and rental costs.
An extra expense endorsement can be added to your business interruption policy. It can assist in getting your business up and running quicker than waiting for repairs to finish. If your company can set up new systems, software, or tools that makes transitioning to full capacity easier, then they might be covered.
Along with new tools often comes additional training requirements. If new tools or systems that help your business get back up and running require training, then business interruption coverage may cover those expenses.
What does business interruption coverage NOT cover?
Business interruption coverage will only cover expenses from operational-halting events that qualify under a commercial property insurance claim. Some scenarios where business interruption coverage will not cover expenses are interruptions not caused by a covered cause of loss, partial interruptions, seasonal slumps, and government policy changes.
Interruptions not caused by a covered cause of loss
If your business is forced to close due to an interruption not caused by a covered cause of loss, business interruption will not cover the expenses. There are endorsements that can be added to your policy that extend coverage options to additional situations. To find out more, speak with a licensed insurance agent who can assist with your specific requirements.
Commercial property damage
Business interruption coverage will not cover expenses to replace or repair damaged property. If your business property is damaged, you will need to submit a claim through your commercial property insurance to receive coverage.
Each business interruption policy will have a minimum length of time a closure must be active before a claim meets coverage criteria. If a business closes due to a short-term event or only partially scales back operations, it most likely won’t be able to receive coverage from a business interruption claim. For example, the minimum length of closure time is typically 72-hours before a claim can be accepted.
If seasonality plays a role in your company’s operations, business interruption coverage will not provide coverage during those seasonal slumps.
Government policy changes
Both federal and state legislative changes happen regularly. If one of those legal changes cause a downturn in your company’s ability to generate revenue, business interruption coverage will not cover that slowdown or closure.
How much does business interruption coverage cost?
Without speaking with a licensed agent, it is difficult to provide an exact cost of business interruption coverage because the policy is tailored to fit your specific needs and industry requirements. Without knowing your business’s exact situation, here are a few major factors that often affect the cost of business interruption coverage:
All of these factors can change how much coverage would be required to keep your business running if an unexpected shutdown occurred. Keeping these things in mind when purchasing your business interruption coverage could be the difference between paying the bills during an emergency and closing your company’s doors forever.
What is a business interruption coverage restoration period?
A restoration period is the length of time your business interruption coverage will provide compensation for lost income. It is important to understand this timeframe when purchasing your policy, as it will dictate how much coverage you will receive in the case of a covered emergency. For example, the typical coverage restoration period is 180-days.
How do I make a business interruption coverage claim?
Most carriers have online claim reporting capabilities, or you can call their toll-free claims reporting phone number. At Winooski Insurance Agency, we are available to provide information about the claim reporting process. Our clients can rest easy knowing our experienced agents are ready to help when needed.
View a list of our partner carriers and instructions on where to file a claim with each.
Why should I get business interruption coverage through an independent agency?
Winooski Insurance has been an independent insurance agency for almost 40-years. During this time, we have created long-term relationships with a multitude of insurance partners which allows us to present you with a broad range of coverage options at competitive rates. We’re committed to helping you address your unique requirements.
“ The entire team at Winooski Insurance have done an outstanding job of providing insurance coverage for my company. This is not always easy, as each project has to be reviewed by Winooski Insurance to verify that we have the required coverages. ”
David Bogue, President
Professional Construction Inc.
“ I have had my company insured with Winooski insurance for more than five years now. They are a valued partner in protecting my business property, employees, and vehicles. From the top dog, Jeff Mongeon, through their entire team, they are professional and responsive. ”
David Evarts, President
“ The team at Winooski Insurance provides our companies with value added services to ensure we are protected from all angles. They have helped us solve a number of complex problems and their service is always friendly and quick. Winooski Insurance is a valued and important part of our team. ”
Robert Murano, Jr., President
Mansfield Housing Group