There is an abundance of insurance options available to protect businesses and minimize their risks, including business interruption insurance. Many business owners are unfamiliar with this type of insurance; however, it could prove to be beneficial.
The Basics Features Of Business Interruption Insurance
Customers who have business interruption insurance receive coverage from the loss of income that comes after a tragedy or disaster. When incidents of this nature occur, businesses have to rebuild and cannot operate at full capacity. Those who have business interruption insurance are protected from this unusual and unpreventable business interruption. Why is this insurance necessary? Most insurance policies cover only the actual damage that occurred to the building during the disaster. While it is nice to be able to rebuild the building with this traditional form of business insurance, the policy will not cover lost income incurred while the business cannot operate at 100 percent capacity. Therefore, business interruption insurance is an extra policy to provide extra protection during tragedies. Those who have this policy are no worse off financially because of the disaster. Their building is constructed and income is also collected under the extra insurance policy. Without this type of policy, many businesses would have no other option but to close their doors after a disaster.
Detailed Explanation Of Coverage Provided
Businesses that have a business interruption insurance policy can expect to have coverage for the following items:
Profits – The biggest area of lost income that comes from a disaster is lost profits. Businesses with business interruption insurance can expect to recoup lost profits. The actual dollar amount is based on the trending profits from previous months on the company’s financial statements.
Short-Term Location – During the rebuilding stages, companies have to relocate to a short-term location. A business interruption insurance policy covers some of the costs incurred because of the move. In particular, businesses can expect to receive financial help for any extra expenses resulting from the move and new location.
Fixed Expenses – Many business expenses are fixed and will continue to occur while the building is being rebuilt. During this time, businesses with business interruption insurance will receive financial assistance to pay for these expenses. The insurance company will again use historical data to determine the dollar amount.
Extra Costs – Sometimes businesses also experience extra costs and expenses due to this temporary situation. Most policies cover these extra costs, as long as they are reasonable, because they help the business stay afloat during the rebuilding phase.
Furthermore, businesses can expect to have these costs covered for the duration of their business interruption. Typically this coverage begins on the date of physical damage and ends when the business resumes to full operation.
How To Get Business Interruption Insurance
Business interruption insurance is not sold as a stand-alone policy. Instead, this insurance is added to standard property insurance policies to provide extra protection to a business. Those companies interested in business interruption insurance should talk to their insurance broker about adding this extra insurance to their current business property insurance policy. In most cases, insurance brokers can provide customers with a package policy that lumps this specific coverage with other business insurance policies. When speaking with the insurance agent, companies need to be sure that the policy provides enough time to rebuild the business and minimize loss. The rebuilding process often takes longer than planned, and it is important to be covered for as long as possible. Lastly, the cost for this coverage varies and depends on a number of different risk factors including the likelihood of disaster and the anticipated cost of operating in a temporary location.
With the increased number of natural disasters, many businesses are finding business interruption insurance necessary. This protection provides peace of mind and also minimizes risks.