While you may be excellent at record-keeping and have your daily operations flowing smoothly, any business owner is familiar with circumstances that can be wildly out of their control! Business interruption insurance will help your business financially if you encounter a sudden closure due to unforeseen events. There have been numerous severe weather events over the past few weeks here in Missouri, with many owners feeling lucky that they had a policy to provide help during a time of need.
What Is Business Interruption Insurance?
This valuable form of coverage will thankfully replace your lost income if your business happens to close due to a covered event such as fire or theft. Sometimes referred to as “business income coverage”, it is usually covered as a part of your business owners policy. There is nothing more distressing than having to temporarily stop collecting revenue, and a solid policy geared toward this type of situation is a powerful source of reassurance.
What Does Business Interruption Cover?
Business interruption insurance covers the very crucial operating expenses of keeping the lights on and the register running due to any covered event. The varieties of peril generally included under this type of coverage are fire, wind, theft, falling objects, and lightning strikes.
The types of operating expenses covered include:
- The revenue you could generate if you were open for business
- Rent, mortgage, and monthly lease payments for your physical space
- Loan payments for sustainable operation
- Taxes
- Payroll
- Relocation costs to thrive in a temporary spot
- Training costs for employees to adequately make due
What Does Business Interruption Not Cover?
Here are some of the exclusions to business Interruption insurance a policyholder may encounter:
- Floods and earthquakes: these do require separate policies.
- Undocumented income that cannot be clearly presented in your financial records.
- Utilities, since they can be shut off during periods of repair.
- Closure caused by viruses and other communicable diseases.
- Damaged property, which is covered under commercial property insurance.
Who Needs Business Interruption Service?
This type of coverage is an excellent idea for ANY type of small business owner. If you rely quite heavily on the functionality of your physical location, it is even more important to know you have this coverage. The pandemic made working remotely grow exponentially, but many types of businesses still greatly benefit from the anchor of a storefront. Even as food delivery services such as Uber and Lyft have seen a surge in their sales, many affluent diners prefer a neighborhood spot with amazing wares to sample.
DIY spaces and “built right here in the USA” shops have also grown in popularity, with the space needed for machinery and other goods never immune from unfortunate mishaps. Here are some of the business types that benefit from this coverage:
- Restaurants
- Retail storefronts
- Salons and Spas
- Dog groomers
- Yoga studios
How Much Coverage Do I Need?
Every type of business interruption policy has its own form of coverage limit. This is the maximum amount that your insurance provider will pay if an official claim is filed. Here it is crucial to consider that you will need to absorb any financial losses above your limit. Here are some important questions to ask yourself when looking for the ideal provider for you.
- How long would it take you to get your business fully operational again after an intense disaster such as a storm or fire?
- Would you put full trust in your security and fire alarms on your premises?
- How much do you think it would cost to rent an entirely new office space in your area, and is it 100% readily available?
Should I Incorporate Business Interruption Insurance As Part Of A Business Owners Policy?
A business owner’s policy provides the convenience of bundling general liability insurance, commercial property insurance and business interruption insurance into the same policy. General liability insurance will cover a variety of many different claims against you including advertising injury, copyright infringement, and even reputational harm. Commercial property insurance protects the physical assets of your business. Signage, the furniture your customers spend time in, computers, supplies, inventory and tools, and business records are all covered.
A business insurance policy costs around $50/month and is well worth looking into if you are a small or midsize business. If you have under 100 employees and an annual revenue of up to $5 million, your operation could be an ideal match for a business owner’s policy. Sometimes when one thing goes wrong, others are close behind in succession, and this type of coverage kicks in to protect you during a potentially very dark hour.
What is a Period of Restoration?
During this period, your insurance company will determine how long you qualify for payments under your business interruption coverage. This is known as the “period of restoration.” Ending as soon as the business in question can resume its daily operation, it can sometimes be a cause of dispute. Insurance companies and business owners, for quite obvious reasons, don’t always agree on how long this period should last.
How Natural Disasters Are Redefining Business Interruption Insurance
Since natural disasters are on the rise, the costs of global damage are around $142 billion per year. Just two decades ago, this number was only $36 billion! The level of risk from these events you will face depends largely on where you conduct business. Tornado Alley’s menace threatens those from the Lone Star State, while those in Florida can count on hurricanes being a threat. In Missouri, we have a fair deal of flooding, but in other ways remain average on the scale comparatively. Natural disasters can rear their head in just a few minutes flat, so keeping an open mind regarding coverage options is best for any business.
Any interruption to your businesses’ daily regimen can add up to a quite costly event in no time. Here at the Alexander Agency of St Charles, we have years of experience with keeping registers running and game plans afloat. Contact us today to make sure you are prepared for anything: the spring season brings with it the potential for numerous covered events. We can assess your level of risk, form an ideal plan of action, and ensure your future profitability. In a world that is growing increasingly unstable, a thorough sense of provision is a reassuring and safety-inducing stronghold.