{"id":27,"date":"2023-10-12T12:48:34","date_gmt":"2023-10-12T12:48:34","guid":{"rendered":"https:\/\/businessyield.com\/ins\/?p=27"},"modified":"2023-10-12T12:50:32","modified_gmt":"2023-10-12T12:50:32","slug":"business-interruption-insurance-what-does-it-mean-cover","status":"publish","type":"post","link":"https:\/\/businessyield.com\/ins\/business-insurance\/business-interruption-insurance-what-does-it-mean-cover\/","title":{"rendered":"Business Interruption Insurance: What Does It Mean & Cover?"},"content":{"rendered":"

Business interruption insurance helps to replace lost business income if you are unable to open your business on a temporary basis due to a loss covered by the policy, such as a fire or theft.<\/p>

Also known as business income insurance, it is one of the most common types of coverage most small businesses need. If a disaster strikes and your business is required to shut down for a period of time, it will help cover lost income or operating expenses like mortgage or rent, loan payments, taxes, and payroll. <\/p>

Understanding business interruption insurance<\/strong><\/span><\/h2>

Business interruption insurance helps protect against lost income after a covered peril affects a business. Covered perils typically include theft, fire, wind, falling objects or lightning. Coverage may help reimburse you in two ways:<\/p>

  1. For lost income<\/strong> from the destroyed merchandise (minus expenses you may have already paid, such as shipping).

    Your pre-loss earnings are the basis for reimbursement under business interruption coverage. Lost earnings, also known as the actual loss sustained, are typically defined as revenues minus ongoing expenses.<\/li>\n\n
  2. For extra expenses<\/strong> if you must temporarily relocate your business because of the fire (for example, the cost of rent at the temporary location).<\/li><\/ol>

    Business interruption insurance is not sold as a separate policy but is either added to a property\/casualty policy or included in a comprehensive package policy as an add-on or rider. Premiums (or at least the additional cost of the rider) are tax-deductible as ordinary business expenses. This type of policy pays out only if the cause of the business income loss is covered in the underlying property\/casualty policy. The amount payable is usually based on the past financial records of the business.<\/p>

    Business interruption insurance coverage lasts until the end of the business interruption period, as determined by the insurance policy. Most business interruption insurance policies define this period as the date that the covered peril began until the date that the damaged property is physically repaired and returned to the same condition that existed prior to the disaster. <\/p>

    According to the Insurance Information Institute, the standard policy is 30 days; however, an endorsement can extend this to 360 days. There may also be a waiting period of 48 to 72 hours.<\/p>

    How does interruption insurance work?<\/strong><\/h2>

    Business interruption insurance works when a covered event occurs. You can file a claim with your insurance company and provide evidence of the damages incurred. Your insurer will review your claim, especially in light of whether the event is covered under your current business interruption coverage.<\/p>

    The idea is that your business will be no worse off than it was before the accident.<\/p>

    Generally, these policies work because they have what’s known in the trade as a \u2018material damage proviso\u2019. This clause is put in place so that any necessary repairs that need to be made or replacements of stock or equipment can be paid for by the insurance provider. It allows your business to get back up and running as quickly as possible so you can continue to trade.<\/p>

    Business interruption insurance can sometimes be offered as an add-on to your standard business insurance or it can be offered as a standalone policy. In many cases, you will also need to have valid building and contents insurance in place to make a claim.<\/p>

    Types of business interruption coverage<\/strong><\/span><\/h2>

    The most common forms of business interruption coverage include:<\/p>