Business Interruption Insurance
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When a disaster strikes your business location, it may be temporarily unusable. Your business will not be producing income and will likely continue to incur fixed costs (rent, utilities, etc.). Standard property insurance does not cover the loss of income caused by the temporary closure of the business. Business interruption insurance can be included in the property insurance coverage to cover this loss.
Business interruption coverage covers:
- The income your business would have made during the period your business location is unusable. This amount is determined by your historic financial records.
- The costs and expenses incurred by your business even though the location is unusable. Again, these fixed costs are determined by analysis of historical financial records.
- Costs incurred in having to move and operate from a temporary location.
- “Extra expenses” that may be incurred by keeping the location open. Extra expense coverage is offered by insurers to lower business interruption costs. For example, if your business can stay open by renting a piece of equipment, then the extra expense of the rental would be covered because the insurer would rather pay the extra expense of the rental than the cost of a shut down.
In short, business interruption insurance serves as a financial bridge until the company can get back on its feet.
Individual business interruption insurance policies can have strict limitations and provisions hidden in the fine print. It is important to read the policy thoroughly so that you fully understand your coverage. For example, post 9-11, many insurance companies now exclude losses caused by acts of terrorism. Some may also exclude “acts of God” including natural disasters.
Consult with a professional insurance agent so that you can find a policy that will completely fill your needs. You should shop around and negotiate. Additionally, it’s important to purchase a policy with a company that has a high rating.
A Few Resources:
State of Florida, Florida Department of Financial Services
Small –Business Owner’s Insurance: A Guide for Consumers
Golden Rules of Preparing a Business Interruption Claim