Why You Should Consider Buying Business Interruption Insurance

Tasha Currah

tcurrah@orrinsurance.net

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Running your own business requires resilience and dedication. Although we try to plan for the worst, some losses are out of your control. They can disrupt your business, which can force you to temporarily close up shop, resulting in a loss of income. While your business may come to a pause, responsibilities such as bills, payroll, vendor expenses etc. will continue to pile up and it can be hard to bounce back when a situation like this occurs. Luckily, this is where Business Interruption Insurance comes in to play.

What is Business Interruption Insurance?

Business Interruption Insurance is designed to help you recover the loss of income and ongoing operating expenses that still occur during the period of time that your business is interrupted. Unexpected losses & disasters can come in many forms:

· Physical damage to property (ex. Windstorm, vandalism, etc.)

· Physical damage to neighboring business (ex. Fire at neighboring business causes smoke damage)

· Physical damage to property of a major supplier or customer– resulting in loss of supplies or income for your business

Types of Business Interruption Insurance

There are generally four coverage approaches to Business Interruption Insurance:

1) Gross Earnings: coverage starts at the time of loss and ends when the property is restored

This approach only covers the “downtime” and assumes that your business has returned to the exact same competitive position as before the loss

2) Profits: coverage starts at the time of loss and continues until income has been restored and you’re put back in the same position you would have been in had the loss not occurred (subject to the indemnity period selected, 12-36 months)

3) Actual Loss Sustained: similar coverage to Gross Earnings & Profits but there is no dollar limit or co-insurance on the policy, the indemnity period is typically limited to the indemnity period chosen (12-36 months)

4) Extra Expense: Provides the extra expense incurred to keep you operating in the event of physical damage. This coverage assumes you will be able to continue operating your business temporarily in some form with little to no loss of revenue.

Determining which coverage is right for you will depend on the nature of your business model. This is where a broker comes in; they will discuss your business needs and help find the right coverage option for you.