Business interruption insurance and how it works
RAPID
SPECIALISTS
Business owners are busy people with many tasks on their to-do list, but they sometimes forget to protect themselves against the unexpected.
Being without business interruption insurance means that the slightest hiccup in cash flow can put the business at risk. In general, business owners do not insure themselves adequately against income-related risks.
What is business interruption insurance?
Business interruption insurance is a type of commercial property insurance that protects against loss of income resulting directly from the loss, damage, covered loss or destruction of insured property. This could be a fire in a restaurant oven, or a windstorm that destroys the roof of a building. commercial building.
Most insurers offer some form of business interruption insurance that covers your income until your business returns to its normal level, i.e. the level of income that existed before the unforeseen event that caused the sudden loss.
How much does it cost?
Business interruption insurance is usually sold as part of a business owner's insurance policy. The cost generally varies according to the company's sales. These elements are factored into the annual cost:
- Industry
- Company size
- Coverage limits
- Location
What does business interruption insurance cover?
The most common business interruption insurance claims relate to risks such as the following:
- vandalism (if the damage prevents you from operating normally)
- burst pipes
- Windstorms
- Fires
Natural disasters like floods and earthquakes, which aren't usually covered by a commercial property policy, probably won't be covered by business interruption insurance either, but you can certainly add coverage for these items to your policy. These are called endorsements, and they're useful.
Policies can vary enormously between what they cover and what they don't cover. You need to know whether the policy you're buying is named perils or all risks. What's the difference? An "all-risk" policy protects against any perils not specifically mentioned in the exclusions, whereas a "named perils" policy only covers the list of perils designated in the policy.
Once your claim has been accepted, you can expect a standard business interruption policy to cover the following expenses:
- lost profits
- Salaries
- loan repayments
- Rent or mortgage payments
- Repairs
- Construction for rebuilding
- Equipment rental
- Temporary relocation expenses
- Taxes
- Training
Make sure your business interruption insurance is up to date with your company's revenues. Some policies have an income ceiling, and your business could earn more money in a few years than it does today.