Jump To:
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What is Business Interruption Insurance?
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What Does Business Interruption Insurance Cover?
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What Isn’t Covered by Business Interruption Insurance?
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What Events Does Business Interruption Insurance Cover?
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What Events Are Not Covered By Business Interruption Insurance?
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How Much Does Business Interruption Cost for Small Businesses?
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How Does Business Interruption Insurance Work?
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Why is Business Interruption Insurance Important for Small Businesses?
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How Much Business Interruption Insurance Do Small Businesses Need?
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FAQs
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Explore Your Coverage Options Today!
What is Business Interruption Insurance?
Business interruption insurance (also called business income insurance) safeguards companies from financial losses due to unexpected events that cause businesses to halt their operations. Natural disasters, fires and theft are all events that can leave organizations in shambles without the proper protection plan in places.
Business interruption insurance works to mitigate these financial risks by replacing lost income while shut down. Additionally, this type of policy covers operating expenses such as rent, power bills, employee wages, bank loans and taxes.
What Does Business Interruption Insurance Cover?
If your business is forced to shut down due to an unforeseen circumstance, the last thing you want to worry about is not being able to pay the bills, or your employees for that matter. Here is a list of the key areas that are covered by business interruption insurance:
- Lost Revenue: Any income you would have earned if your business was running normally.
- Employee Wages: Ensures your staff continues to receive payment, and helps avoid layoffs during the closure.
- Ongoing Expenses: Any essential expenses that keep regularly keep your business afloat such as rent and utilities (this varies from policy to policy).
- Relocation Expenses: Covering moving expenses to your temporary location, and the cost of rent.
- Taxes: Tax obligations are taken care of while operations are halted.
- Loan Payments: Keeping up with payments helps to avoid defaults.
- Recovery Costs: Payments contribute to efforts needed to get up and running again such as marketing.
- Training Costs and Commission: The cost of retraining personnel is generally covered, helping businesses recover with ease.
What Isn’t Covered?
Most business interruption policies do not cover the following assets or losses:
- Vehicle Damage (commercial auto insurance is needed).
- Damaged Inventory or personal items (usually covered by commercial property insurance).
- Undocumented revenue losses.
- Electronic data (unless your policy explicitly states otherwise, cyber insurance is needed).
What Events Does Business Interruption Insurance Cover?
Business interruption insurance usually covers the following disruptive events:
- Fires
- Windstorms
- Hailstorms
- Lightning Damage
- Water Damage (not including flooding)
- Theft
- Explosions
- Vandelism
- Vehicle Damage
- Equipment Breakdown
- Civil Disruptions
- Supply Chain Problems
What Events Are Not Covered?
- Flooding/Mudslides (flood insurance is required)
- Earthquakes (earthquake insurance is required)
- War-Related Damages
- Pandemics or Disease Outbreaks
- Power Outages (that originate off-site)
- Gradual Deterioration (wear and tear)
How Much Does Business Interruption Cost for Small Businesses?
The average cost of a business interruption insurance policy for small businesses varies based on the following factors:
- Company Size: The more employees you have, the more wages will need to be covered in the event of an interruption.
- Industry: Industries involving high-risk procedures or equipment may face higher rates.
- Location: Geographic areas prone to natural disasters or high crime rates may face increased costs.
- Revenue: The more income your company needs to be covered, the higher your premium will be.
- Policy Limits: While higher coverage limits offer more protection, they tend to increase the costs of premiums.
On average, the cost of a business interruption policy for a small business ranges between $500 and $2000 per year. To get a free quote tailored specifically to your business, click the button below.
How Does Business Interruption Insurance Work?
Here’s a quick overview of how a business interruption insurance plan works:
- Triggering Event: Coverage is activated after a covered event (event included in your policy) takes place.
- Restoration Period: Policies typically include a 48 to 72 hour waiting period before the coverage actually kicks in and losses start to be settled.
- Claims Process: After the restoration period, you’ll then file the claims with your insurance provider, providing all details of damages and financial losses.
- Investigation: The insurer generally investigates the business site and reviews any financial records to determine the extent of damage, and the amount of compensation you’ll receive.
- Payout and Recovery: Lastly, the insurance company will compensate you for the lost revenue and any other applicable expenses, to help get your business up and running again. The length of time that you will receive funds depends on the assessment made by the insurance adjuster, but most policies cover between 3 to 12 months. With that being said, coverage can be extended if necessary.
Why is Business Interruption Insurance Important for Small Businesses?
Let’s face facts. Small businesses tend to have less capital on hand than bigger, more established corporations. Because of this, an unexpected shutdown can be disastrous for small businesses, in many cases causing them to layoff employees, lose customers, miss payments or worse, shut down their entire operation.
When a business is flourishing, monthly expenses may seem like an afterthought, but when a disaster takes place, they add up very quickly. With a comprehensive business interruption plan in place, you can rest assured knowing that your business will recover quickly and come back stronger than ever.
How Much Business Interruption Insurance Do Small Businesses Need?
While the amount of coverage that a businesses needs varies greatly and can be difficult to determine, consider the following when estimating your company’s insurance needs:
- Identify Your Average Monthly Revenue: This exercise gives you an idea of the total income that’ll need to be replaced during a shutdown.
- Estimate Your Monthly Operating Expenses: Could include rent, utilities, payroll, taxes and loans.
- Estimate the Total Recovery Time: Ask yourself how long you think it would take to get your business up and running again after an event.
Now take the average monthly revenue and multiply it by your estimated recovery time (for example, if your monthly revenue is $20,000, and you think it will take you 12 months to recover, you’d calculate $20,000 x 12). Do this exercise again with your monthly operating expenses. Once this is complete, get in touch with a licensed insurance agent, who will help you find a tailored policy based on those profits, expenses and estimated down-time.
FAQs
Is business interruption insurance purchased as a standalone policy?
Business interruption insurance is not usually sold as a standalone policy. Instead this coverage type is commonly purchased as part of a Business Owners’ Policy (BOP), which combines general liability insurance, commercial property insurance and business interruption insurance. Another option is to purchase it as an add-on or endorsement to a commercial property insurance policy or a general liability policy alone. Combining multiple types of insurance on policy, not only protects your company from multiple angles, but also tends to come with discounts.
What is an example of small business interruption insurance?
Business interruption insurance kicks in when a business interruption event takes place causing physical property loss, causing the business to shut down operations. Common examples of interruptions include fires, cyber attacks or theft.
How long does business interruption insurance last?
Business interruption insurance provides monetary relief for businesses during the “restoration period” or time needed to repair or rebuild the damaged property. In general, this period usually lasts up to 12 months, but could be extended under certain circumstances.
Does business interruption insurance cover pandemics or government shutdowns?
Business interruption insurance policies usually do not cover government shutdowns or pandemics. To ensure that you understand what is covered and what isn’t, view your policy details or reach out to your insurance agent.
Explore Your Coverage Options Today with EZ.Insure
EZ.Insure understands how difficult it is for small businesses to recover after experiencing an event that forces a temporary shutdown. Instead of waiting for the unexpected to occur, be proactive and get insured today!
Our easy-to-use platform offers free quotes tailored to your business needs, a side-by-side plan comparison tool, and 24/7 expert assistance from our licensed insurance agents. Getting insured may seem like a daunting process, but with the help of EZ.Insure it doesn’t have to be!
To get started and receive your free, instant quote, click the button below or call us at (855)-694-0047.