Factors To Consider As You Evaluate Business Interruption Insurance

Business interruption insurance serves a valuable purpose for your company. It replaces lost income and pays extra expenses if a covered peril disrupts your business. Consider several factors as you evaluate business interruption insurance for your company.

List Covered Perils

The typical business interruption policy covers perils such as theft, wind, falling objects, fire and lightning. If your business is at risk for one of these perils, you may wish to purchase business interruption insurance and protect your company.

Replace Lost Income

While your standard business insurance covers tangible losses, business interruption insurance adds another layer of protection since it covers income losses, too. If your business cannot operate, you can file a claim and receive valuable compensation for your lost income as you rebuild your company.

Remember the Restoration Period

Most business interruption insurance policies cover your losses and income only during the restoration period. It’s defined as the amount of time you need to repair, replace or rebuild your property after a covered peril. Keep in mind that the restoration period depends on the peril.

Choose the Right Coverage Limit

When you purchase business interruption insurance, you will choose a policy coverage limit. It’s the amount of money you receive if you file a claim.

Because you must pay out-of-pocket if your losses exceed your coverage limit, ask several questions that help you choose adequate coverage for your needs.

  • How much time will it take to return your business to normal operational status?

  • Is your building protected? Does the sprinkler and alarm system functional properly?

  • Do you have immediate access to comparable commercial space or will it take time to find a suitable replacement location?

  • What is your current net income?

  • What ongoing loan payments, taxes and other expenses do you owe?

  • How many employees will you continue to pay?

Choose Riders

While it’s beneficial, your business interruption coverage may not cover all your losses. You may need the extra expense and contingent business riders.

The extra expense rider will cover additional expenses you incur after a peril, such as higher than normal building rent or added expenses associated with rebuilding according to new codes.

The contingent business insurance rider covers lost profits that occur because of a peril other businesses face, including your suppliers or website provider.

Count the Cost

The cost of a business interruption insurance policy ranges from $750 to over $10,000. Weigh the premium cost against expense you may face if you cannot run your business properly because of an interruption.

When you consider these factors, you can decide if you need business interruption insurance. Your agent can also help you evaluate its importance for your company.
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