Life is unpredictable, and no matter how meticulously you overview every aspect of your business, certain circumstances beyond your control can force you to close down, causing financial havoc temporarily.
However, “business interruption insurance” can help protect your finances if you are forced to close your business for reasons listed on your insurance policy.
This article will give an overview of things covered by Business Interruption Insurance to help you decide if it’s worth it for your business.
What Is Business Interruption Insurance?
Business interruption insurance coverage replaces the loss of income during periods when you are forced to close down your business due to natural or man-made disasters. Depending on your policy, this can be due to fire, wildfire, or even government intervention like lockdowns. Business interruption insurance is usually not sold as a standalone insurance policy but rather included as an add-on on other policies.
What is covered under Business Interruption Insurance?
Depending on the terms of your policy and state law, your coverage for Business Interruption Insurance may vary. But for most businesses, it generally covers the following items:
Fixed cost:
Business Interruption Insurance usually covers any fixed overhead cost you have for your business, like rent.
Profits:
Based on the performance of previous months (an average), your policy may include reimbursement for a percentage of profit.
Extra expenses:
Business Interruption Insurance will also pay for expenses you may need to continue doing business. This may include costs for buying new equipment or severance pay.
Taxes:
You may need to continue paying taxes even though your business may not be fully operational. Business Interruption Insurance covers any tax expenses you may incur.
Loans:
If you have any outstanding loans and need to pay monthly installments, Business Interruption Insurance will help you pay for them.
What does Business Interruption Insurance not include?
● Here is a list of items that are not included in your Business Interruption Insurance coverage:
● A natural disaster that involves water (flood, hurricane) and earthquake.
● Failure to submit a document that proves profit
● Utility bills
These are some of the common scenarios that Business Interruption Insurance does not cover. If you have any specific queries, make sure to contact your insurance provider directly.
Does Business Interruption Insurance cover pandemics?
The global pandemic has caused many businesses to shut down, so does Business Interruption Insurance cover for pandemics like Covid 19?
It actually depends on several factors, including the policy of your insurer. However, in some states, the federal government intervened and had its own legislation, which allowed Covid 19 coverage. But in most states, pandemics like Covid 19 are NOT included under Business Interruption Insurance.
Reach out to your insurer for more details.
Final verdict: Is Business Interruption Insurance worth it?
Business Interruption Insurance does include several useful policies that most small business owners would appreciate. Although it may not cover all expenses your business has to endure during a shutdown, it still provides enough financial coverage to make it a complaining option.
If you are a small business owner worried about your business’s future, opting for Business Interruption Insurance will most likely be worth the price.