Commercial Insurance: Business Interruption Coverage

In the business world, success often hinges on preparation, resilience and adaptability. However, no preparation can shield a company from unexpected events that disrupt its operations. Whether it’s a natural disaster, a cyberattack or a global pandemic, these disruptions can have profound financial consequences for businesses. This is where business interruption coverage in commercial insurance comes in as a vital safety net, to help businesses weather the storm and recover their losses.

What Is Business Interruption Coverage?

Business interruption coverage, or business income insurance, is a type of insurance that helps provide financial protection to businesses when their operations are interrupted or halted due to unforeseen events. Depending on the policy, these events might include fires, vandalism, supply chain disruptions and public health emergencies. The coverage is designed to compensate businesses for the income they would have earned if the disruption hadn’t occurred, as well as additional expenses they incur to mitigate the impact of the interruption.

What Does Business Interruption Insurance Cover?

Business interruption insurance may include the following:

• Loss of income—The core purpose of business interruption coverage is to replace the income a business would have earned if the disruption hadn’t occurred. This includes profits that would have been generated during the period of interruption.
• Extra expenses—In addition to lost income, some business interruption policies may help reimburse extra expenses incurred to keep the business running despite the disruption. These may include costs associated with relocating to a temporary workspace, expedited shipping fees and overtime pay for employees working to restore operations.
• Coverage period—The coverage period is a critical factor to consider. It typically begins when the disruption occurs and ends when the business is fully operational again or when the coverage period specified in the policy expires, whichever comes first.
• Waiting period—Most policies include a waiting period, often referred to as the “elimination period.” This is the time that must elapse before the coverage kicks in.
• Insured Perils—Policies specify the types of perils or events that are covered. It’s important to review and understand these perils to ensure that your business is adequately protected against potential risks.

Who Needs Business Interruption Coverage?

Any business that relies on its physical assets, operations and revenue streams to thrive should consider business interruption coverage. This includes small businesses, large corporations, manufacturers, retailers and service providers. Even businesses that operate online can benefit from this coverage in case their operations are disrupted due to events such as cyberattacks or server failures.

Contact Lord & Associates Insurance Agency to discuss your business insurance needs. We can help ensure your organization is prepared for the unexpected.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.