What is business interruption insurance?
What is Business Interruption Insurance?
It’s probably one of the most valuable coverages that business owners should include in their small business insurance policy. But it’s one of the most overlooked as well. That’s because most entrepreneurs aren’t aware that when disaster strikes it’s not the cost of the physical damage to their premises that will really hurt their small business, but the amount of income they lose because they’re out of action.
What does it do?
Imagine that your office has a fire and your business is forced to shut down for a time. Not only is your premises damaged, but now you can’t work. Who’s going to put things right? Well, your insurer will, provided you have Business Interruption (BI) coverage as part of your property or business owners insurance.
How does it work?
Your insurer will pay you the income your company would have made during the period it’s out of action due to a covered loss and the time it takes to get back to normal. You will also be compensated for the normal operation expenses (for example, rent, utilities) you incur even though your premises are unusable. If you have to move to temporary premises your insurer will also reimburse you for the additional reasonable costs you incur. Your insurer will also pay most of your employee payroll for a period of time. Most business owner insurance policies have a waiting period before business interruption coverage applies, typically measured in hours. This means your business has to be down for a period of time before the coverage kicks in. Think of this like any other insurance deductible, but measured in time instead of dollars. Also, loss payments are usually capped – either in a stated dollar amount or in the amount of money payable for a specified period of time during which your business is down.
Remember, business interruption coverage can be a life preserver for your business. Don’t skimp on your small business insurance – it could take a long time for your firm to recover from a disaster, and while you recover you’ll need the money – and assistance – that Business interruption insurance provides.
Related Articles
A cyber security expert answers your ransomware questions
What is ransomware? Who is vulnerable? And most importantly, how can you protect your small business from the havoc it can wreak?
We sat down with Meghan Hannes, Head of Cyber and Tech Errors and Omissions for Hiscox USA. Meghan has been underwriting and managing cyber security and privacy-related risk since 2004. She is a noted author, speaker, and award-winning product head in the cyber insurance space.
Remote working increases cyber risk for small businesses
The pandemic has changed the way we do business in many ways. One of the most remarkable changes – and one that may become permanent for many businesses – is remote working. While this has been an advantage, the increase in cyber attacks since more people have been working from home is not a coincidence
Read More
The most common accounting mistakes made by small businesses and how to avoid them
Whether you’re a new or experienced small business owner, financial responsibilities—including accounting—can take a while to get the hang of. There are so many moving parts to keep track of, not to mention a lot of math to do, which makes mistakes almost inevitable. That’s why many companies bring on an accountant as soon as they can. But if that isn’t an option for you just yet, don’t worry. We’ll cover some of the most common accounting mistakes made by small businesses and how to avoid them, so you can protect your business.
Read MoreWe provide tailored insurance for the specific risks you face, so you can take the right risks to grow your business.