A Guide to Understanding Business Interruption Coverage

Any catastrophic event can cause you to experience financial and property loss, but with Business Interruption Coverage, you can make sure that you and your business are protected.

According to FEMA, 40% of businesses do not reopen following a disaster and another 25% fail within one year. On top of that, the SBA found that over 90% of companies fail within two years of being struck by a disaster.

However, staying in business after a disaster can be as easy as getting the right amount of Business Interruption Coverage. Unpredictable events such as cyber-attacks, hurricanes, employee issues, and damage to your property, can create a shattering financial situation for you and those who might depend on you. 

Whether you are a small business or a large corporation, Business Interruption Coverage should be an essential part of your insurance program and can cover the perils of any sort of interruption. Below, we explain how this type of coverage works, to help you better understand this valuable add-on policy that can help protect your business against financial losses caused by an unexpected event. 

What is Business Interruption Coverage?

Business Interruption Coverage (aka business income insurance) may help you replace loss of income and cover ongoing expenses such as payroll, mortgage/rent and professional fees incurred by a business when damage to its premises causes a slowdown or suspension of its operations, even during a temporary relocation. These losses can include something as big as a massive hurricane, a fire, theft, or anything that may potentially damage your business and its operation. 

Additionally, this coverage can be added under a typical Business Owner’s Policy, usually under the same line as Commercial Property Insurance and General Liability Insurance.

What can Business Interruption cover?

In general, you could recover documented net profits (or losses) before taxes that would have been earned, and all normal continuing operating expenses incurred during the interruption or slowdown, including payroll. 

How much coverage do you need?

It might be challenging to predict just how much coverage your business might need. Still, you can project future profits and, then, estimate how much coverage is necessary. The range and cost may vary depending on your industry, location, how many employees you have, and if there are any potential risks for natural disasters in your area. Keep in mind that you can pay extra to cover other factors such as utilities services interruption, property operated by others whom your business depends on, extended suspension to comply with minimum standards of an ordinance or law, expanded coverage for the impact of a civil authority that prohibits access to your business, cyber risks and more. 

The coverage usually starts paying out after 72-hours after the damage and ends when the property is repaired, rebuilt or replaced with reasonable speed and similar quality.  

If your business cannot survive or operate after a fire, physical damages, hail, wind, or other disruptions, you should consider this type of coverage as part of your business continuity plan and to further protect your business and financial wealth. 

At Fulcro, we are fully committed to making insurance understandable, secure, and honest. Our trustworthy team is motivated by genuine care for people and is here to provide you with the support you need every step of the way. 

Take the proper steps to protect your business from unexpected events that could cause your business to go under. Contact us to discuss your next steps to ensure that you are protected in the case of an unforeseen situation.