Business interruption insurance provides a valuable safety net in times of crises. Risk managers must have an in-depth knowledge of its terms and conditions so they can make well-informed decisions when considering this coverage option.
CBI coverage protects against financial loss from disruptions to supply chains and is an additional layer of coverage beyond standard BI policies.
1. Lost Revenue
Business interruption insurance is an essential element of an owner’s policy and can help cover expenses after an unforeseen disaster strikes. But exactly what does this cover and how can it work?
To qualify for reimbursement under a business interruption insurance policy, several things must occur. First is physical damage to insured properties – for example a fire or hurricane might damage a restaurant or storefront and this sets in motion coverage of lost income and extra expense coverage.
Documenting actual losses and extra expenses is crucial, including detailing what caused them and creating a timeline of events that led up to each loss. Your insurance provider, in consultation with you, will also determine your period of restoration payment options – an integral component for many businesses that need time to rebuild customer relations or find new locations; consequently contingent business interruption endorsements may also be offered on certain policies.
2. Lost Customers
Business interruption coverage provides essential protection to help companies reopen faster and continue serving customers as expected. It should be an integral component of every organization’s risk management plan.
Business interruption policies differ from traditional property policies in that they do not require a dollar-based deductible before offering loss-of-income benefits. Instead, most policies include an initial 48 to 72 hour waiting period before they pay out losses in what’s known as “period of restoration.” To learn more, refer to your policy’s specific details.
Key sources of business interruption (BI) claims include fires, aviation collisions and storms; however, other events like power outages or government-mandated shutdowns (like during COVID-19 pandemic) can also lead to them. To make sure you’re protected against all threats possible, seek an agency with experience who takes time to understand your individual risks.
If you don’t currently have business interruption coverage or you are uncertain if your current policy offers sufficient protections, add it as an endorsement to your commercial property insurance or purchase a standalone policy. Be sure to carefully evaluate where and what type of loss are covered before purchasing, as this will have an impactful effect on costs associated with insurance policies.
3. Employee Wages
Business interruption insurance provides coverage against financial losses when your business needs to close unexpectedly due to a covered event, including lost revenues, mortgage, rent or lease payments, taxes payable, relocation costs and loan payments incurred as well as training fees needed to get back up and running quickly.
Your business might require different coverages depending on its needs; commercial property insurance to safeguard products or equipment stored inside, workers’ compensation in case an employee suffers an accident at work and general liability coverage to provide protection from customer claims.
COVID-19 and its devastating impact have highlighted the necessity of having business interruption insurance in place, which will enable your company to recover faster while paying employees and serving customers without interruption. We can assist in understanding which coverages will best fit your company and offer recommendations suited specifically for it.
4. Equipment Repairs
Business interruption (BI) insurance should be an essential element of any small business’s insurance portfolio. As part of a comprehensive policy or add-on extension, this coverage helps businesses recover revenue lost to disaster, cover ongoing expenses without disruption, and continue serving customers without missing a beat.
To be eligible for a business interruption (BI) claim, your business must suffer direct physical damage that requires repairs. For instance, fire could ruin your restaurant kitchen, and hurricane could wreck its roof – two scenarios which would qualify your company.
Once damage is assessed, an evaluation period known as restoration begins. This timeframe covers income and operating expenses while restoration occurs.
To maximize business interruption insurance, it’s essential that you accurately calculate both ongoing business expenses and annual revenues. A knowledgeable risk management professional can assist in establishing the appropriate limit and also review existing policies to identify gaps in coverage before offering suitable insurance solutions.
5. Loan Payments
Business interruption insurance can protect your company against loan payments for equipment, buildings or other properties it doesn’t own; typically this type of cover can be found under extra expense coverage of business interruption policies.
Coverage may differ based on insurer and policy details, yet all business interruption policies share certain basic criteria to begin coverage. First of these is that your property must experience direct physical damage; such as being burned down in a fire, or damaged during a hurricane.
Second, damage must cause your company to temporarily suspend operations in order to qualify for insurance reimbursements for lost revenue, operating expenses (such as utilities), rent or mortgage payments, payroll taxes and loan repayments. Some policies also cover moving costs to temporary locations as well as advertising to inform customers of changes; in addition, there are even policies with civil authority coverage protecting from government orders closing or quarantining premises.