What Does Business Interruption Insurance Cover?

Business Interruption Insurance Cover
Photo by Glenn Carstens-Peters on Unsplash

Business interruption insurance, also known as business income insurance, aims to bring the business back in the same running pattern as before the disaster or disruption. It helps replace lost business income if you cannot open your business temporarily after the loss/disaster has occurred.

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How To Buy Business Interruption insurance?

Business Interruption insurance policies are not available as independent insurance. Instead, it is offered as a part of a business owner policy or an optional extra of a business insurance package or premium set of policies. If you want to know more about the competitive business formation services, including insurance plans in general and Business Interruption Insurance Services, please click here.

The Covered Peril of Business Interruption Insurance

Business interruption insurance covers operating expenses generally. The covered perils typically include wind, fire, theft, falling, lightning and natural disaster.

The insurance majorly covers the expenses that may include the loss of revenue during the disaster period, training of employees for new equipment, business loan payments, payrolls and taxes, and the temporary relocation cost.

  • Fixed Cost

Business Interruption Insurance covers costs incurred to do business and operating expenses.

  • Profits

Business Interruption Insurance offers profits reimbursement based on the prior month’s performance.

  • Commission and Training Cost

Suppose the machinery has been damaged due to a natural disaster and needs to be replaced. In that case, Business Interruption Insurance covers the cost of replacing machinery and training employees to use new machinery.

  • Temporary Locations

Some Business Interruption Insurance policies cover the cost of doing business from a temporary location, i.e. cost of moving the business and operating from the temporary location.

  • Employee wages

Business Interruption Insurance policies help you retain your employees during the shutdown by offering employee wage cover. In addition, the wage cover allows you to develop a payroll.

  • Loan Payments

Business Interruption Insurance policies help to pay the liability of monthly loan payments even when the business generates no income during a disaster.

  • Taxes

Businesses need to pay State and Government Taxes even during the disruption. Business Interruption Insurance policies help pay taxes on time and avoid penalties.

  • Extra expenses

Business Interruption Insurance policies allow businesses to get back to their solid footing by reimbursing reasonable expenses beyond the fixed costs.

  • Civil authority ingress

Sometimes businesses have to face government-mandated closures that cause instant financial loss. Business Interruption Insurance policies cover these events also.

Business Interruption Insurance, Pandemic and What not Covered?

Business Interruption Insurance policies have specific coverage limits, and they also clearly stipulate the coverage areas and amount of losses they will cover. The financial losses exceeding the coverage limits are usually the company’s responsibility.

  • Business Interruption Insurance does not cover the loss of income due to a Pandemic. Insurance plans typically do not include reimbursements for Pandemic caused by viruses and bacteria.
  • Business Interruption Insurance policies do not cover broken items.
  • Business Interruption Insurance policies do not cover damages due to earthquakes and floods.
  • Business Interruption Insurance policies do not cover utility expenses.

Restoration Period of Business Interruption Insurance

Business Interruption Insurance policies have a restoration period. The length of the restoration period under a covered claim allows you to pay for lost income and extra expenses while you restore your business.

Most business interruption policies are valid until the end of the business interruption period, as determined by the insurance policy. It begins from the beginning date of the covered peril and ends until the date when the customer’s claim regarding damaged property is satisfied.

However, the policies usually cover 30 days; however, an endorsed plan may cover 360 days.

Tip: Document any damage with photos and videos and keep the repair receipt to claim your insurance.

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