Business interruption insurance covers losses when a business has to close due to a peril, compensating for lost profits and fixed expenses. Additional expense insurance and contingent business interruption are related products. It’s important to consider potential problems and relevant insurance products when discussing business insurance options.
Business interruption insurance is an insurance product that insures businesses against losses suffered when they have to close as a result of a certain peril, such as fire or flood. It is purchased as an addition to an existing insurance policy, and there are several types of business interruption insurance available. This insurance product can be a very solid investment for a business. While most businesses wouldn’t operate without, say, fire insurance, they might not think about what would happen if they had to temporarily close due to fire, and business interruption insurance is designed to cover this.
If a business closes due to fire, flood, power loss, windstorm, or other perils listed in the business interruption insurance policy, the policy will compensate the business for lost profits during the closing period and pay the fixed expenses that may persist. even while the business is closed. For example, a business would need to pay rent even if there was no electricity. Some business interruption insurance policies will also provide coverage that would allow the business to operate in temporary premises until the original facility is ready for use.
Businesses may be eligible to purchase additional expense insurance, a form of business interruption insurance that will cover the costs of keeping a business open if it is cheaper to do so than to provide coverage during a shutdown. Another related product is contingent business interruption, which provides coverage when a business is interrupted by a problem with a supplier. For example, if there is a fire in a supplier’s warehouse and nothing can be shipped, a company may be forced to close or restrict operations until the supplier recovers; Business interruption contingent insurance provides coverage during this period.
When discussing business insurance options with an insurance agent, it is wise to ask about business interruption insurance and other relevant insurance products. It can pay to think ahead when it comes to potential problems a business may encounter, as there are insurance products for a wide range of situations that can help keep the business functional. Business owners may also consider asking other community members if they have specific tips that might be relevant to the area. For example, purchasing additional flood coverage might not occur to a business if it was unaware that its facility was located in an area that tends to experience flooding in the winter.
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