Do I Need Business Interruption Insurance?

Not many business owners would consider going into business without insuring their business assets, such as the equipment they use, against human damage and natural disasters. However, business interruption insurance is probably equally if not even more important in order to keep the company running even after damage has occurred to its premises. If you are filling in your insurance forms and asking yourself, “do I need business interruption insurance?” consider asking “How much money would I lose every day that my business is closed because we lost equipment or our premises due to an accident?” as that’s what business interruption coverage covers when sold along a traditional insurance policy.

What Does Business Interruption Insurance Covers

Business interruption insurance covers the company for the losses occurred due to interruption of service caused by the elements the policy is insuring for. So for example, if your fire insurance has business interruption coverage you will be compensated for the revenue you cannot earn while your premises are being restored after a fire. The degree of business interruption coverage depends on your particular policy or insurance package, but often will kick in 24 or 48 hours after the premises are deemed unusable, and last for as long as set on your contract.

Business interruption insurance covers the profits you would have earned if you didn’t have to vacate the premises, based on your previous earnings and financial records. In most cases it will also cover the cost of utilities and other bills that will keep coming even if the business cannot operate. This means that an established company with a proven track record of earnings will probably benefit more than a starting home business that could be operated from elsewhere while the reparations are taking place.

In the unfortunate case of a fire or flood damaging your business premises, good business interruption coverage can be key for the company to survive while the premises are returned to working order, or while finding new ones. In some cases, extra expense insurance can be purchased to compensate the company for the reasonable amounts of extra money that it spends in order to get back to business quicker, such as operating from temporary premises while the repairs are taking place.

Business interruption coverage is usually an add-on on top of your regular fire or property insurance, and cannot be purchased individually because it will only kick in when your regular insurance policy does. If you are wondering “do I need business interruption insurance” consider how difficult it would be for your business to operate if its usual premises were not available, and how much that would cost you every day. You’ll also need to be able to prove that you actually would have been making specific amounts of money. For example, affiliate marketing and other money making schemes that only need a laptop to operate and have passive revenue potential may not require business interruption insurance.