Business Interruption Insurance

3/10/2021 (Permalink)

It's common practice to maintain commercial property insurance policies to repair and replace your assets in the event of a covered peril.  In fact, for its cost, it's extremely risky to even consider not carrying this insurance.  Commercial Property Insurance can pay your repair or replacement costs if your business property gets damaged or destroyed from a fire, theft, or other covered loss.

However, when your business is impacted by an event that forces closure, the impact of lost revenue and the burden of ongoing costs can be crippling.  Few consider adding Business Income (interruption) coverage.

Business Income Coverage (BI) can help with operating expenses during the restoration period until the business can resume normal operations.  This coverage can include:

• Lost Net Income
• Mortgage and Lease Payments
• Employee Payroll
• Taxes
• Loan Payments

As with any coverage policy, you need to consider reasonable terms when establishing the policy.  After a major disaster, it can take more time than many people realize to get “back in business.” Business income coverage likely has a "restoration period.” This is the length of time that a policy will help pay for lost income and extra expenses while the business is being restored.

So, this then begs the question of "how much BI insurance coverage is needed?".  The general rule is to use gross earnings and projections to help determine future profits.  This will assist in determining the right amount of coverage.

What is NOT covered by BI Insurance?  Typically, the following is not covered:

• Broken items resulting from a covered event or loss (such as glass)
• Flood or earthquake damage, which is covered by a separate policy
• Undocumented income that’s not listed on your business's financial records
• Utilities
• Pandemics, viruses, or communicable diseases (such as COVID-19)

BI Insurance may also include extra expenses which will cover anything beyond the normal day-to-day expenses, while the business recovers.  This includes:

• Renting a temporary place of business while the original place of business is being restored
• Replacement of hardware, technology, and furniture
• Paying overtime for employees or hiring more employees
• Leasing equipment

Speak with your Commercial Insurance Agent to discuss BI insurance and other policies which could protect the business during unplanned outages of all types.

Contact us at 973-383-2024 if you have a service need or click here to visit our website to learn more about SERVPRO of Greater Sussex County's System Services.