Understanding Business Interruption Coverage With a Commercial Insurance Agency
Owning a business comes with some pretty great rewards, but it’s not without its challenges. When you’re the one at the helm, you’re in charge of a seemingly never-ending array of responsibilities, from daily operations to employee management to finances.
Naturally, one of the scariest prospects is the unexpected: an equipment breakdown, a severe weather event, or some other unforeseen disaster that forces you to close your doors for who knows how long.
Beyond immediate issues like property damage, being unable to operate for an extended period can absolutely threaten your business’s survival — and that’s exactly why business interruption coverage exists.
There’s Commercial Insurance for When My Business Can’t Operate?
Yes! It may seem a little far-fetched, but if you think about it, commercial insurance is generally geared toward problems businesses are likely to face.
Amid more classic considerations like theft, fires, or floods (which overlap here), business interruption insurance, at its core, offers a potential lifeline when you have to halt operations temporarily, replacing lost income and covering necessary ongoing expenses as you recover.
Given that “business interruptions” can be many different types of unforeseen or unfortunate events, business interruption coverage isn’t usually sold as a standalone policy. Instead, it’s typically added as part of a broader commercial insurance package, often linked to your commercial property insurance.
Also, in order to be eligible for coverage, the interruption you’re claiming must stem from direct physical loss or damage covered by an event specifically included in your policy documents.
What Usually Gets Covered?
When a covered event leads to an unavoidable shutdown, business interruption coverage could get you reimbursed for:
Lost net income, or the profit your business likely would have earned if operations hadn’t been interrupted (this is usually based on your historical financial records)
Ongoing operating expenses that you continue to have even when your doors are closed, like rent or mortgage payments, utilities, insurance premiums, and salaries for key employees
Temporary relocation if you’re able to operate from a different site in the interim while waiting for your main location to be repaired
Extra expenses you might incur to expedite reopening or minimize the shutdown period
The specifics of what’s covered, like the maximum payout, the length of time the coverage applies (the “period of restoration”), or any deductibles or waiting periods, all depend on your policy, so make sure to review your policy documents thoroughly.
How to Make the Most of Your Policy to Help Your Business Heal
Any interruption to your operations can be devastating, especially when you’ve poured your heart and soul into your company and then something terrible comes out of left field. That’s stressful enough — adding the often jargony and complicated task of policy navigation certainly doesn’t help.
Tasks like determining what constitutes a “covered peril,” accurately calculating lost income, documenting ongoing expenses, and adhering to policy conditions all require careful attention. This is where bringing in a knowledgeable commercial insurance agent can be helpful, especially in terms of getting you the most you can get in order to recover. If you haven’t experienced an interruption to your operations, reaching out to a dedicated commercial insurance agency to review your policies now might set you up to whether the storm should ever happen.