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Return To: Business Insurance – The Ultimate Guide
Have you just started a small business? Or are you an entrepreneur who’s been in the game for years?
Whatever your experience level in entrepreneurship, you’ll need a safety net when everything goes south. You don’t have to be in Tornado Alley or a flood zone to prepare for possible cessation of your operations, and with business interruption insurance, you can!
Whether you need to shut down for 48 hours or a week, you need business interruption insurance. You need to speak with a North Carolina–based provider that offers this and other types of insurance for your business.
Business interruption insurance can protect you when there is a halt in your operations. From potential profits to relocation, business interruption can help you with the costs associated with these and more.
Business interruption insurance covers you and your business when simple business insurance can’t. If you want to learn more, sit back and keep reading our ALLCHOICE guide to business interruption insurance!
What Is Business Interruption Insurance?
If you’re a business owner, the business interruption insurance definition is straightforward. Business interruption insurance is one of several types of business insurance.
Business interruption coverage is a form of income protection when your business has to temporarily shut down. It provides coverage for financial losses you might suffer.
So, what does business interruption insurance cover? Aside from income, there are more things that business interruption insurance will include in its coverage. However, some losses or damages do not fall under business interruption insurance coverage. For a quick peek, refer to the table below:
| Usually Covered By Business Interruption Insurance | Not Covered By Business Interruption Insurance |
| Income loss (net income as proven by financial statements and projections) | Broken items |
| Rent or mortgage payments | Damage from floods (covered by flood insurance) |
| Taxes | Damage to a business’s building (may be covered by landlord insurance) |
| Loan payments or repayments | Utilities |
| Employee salaries | Outbreaks (e.g., pandemics like COVID-19) |
Use the above table as your rule-of-thumb guide for business interruption insurance coverage.
How Does Business Interruption Insurance Work?
Business interruption insurance, also known as business income insurance, compensates you by replacing the income you could have made if the business did not close for a covered loss.
As soon as a covered event occurs, you need to notify your carriers that a physical loss has occurred due to a covered peril and that your business has to stop or limit normal operations.
This will start your waiting period (also referred to as a deductible) and your period of restoration will begin.
The period of restoration refers to the time your business interruption insurance coverage will take effect. It is usually of a certain duration, covering income losses for a fixed time. Of course, this would depend on your business interruption insurance policy.
Often, the period of restoration for most policies is 30 days. You can extend this by getting an endorsement. Your restoration period extension can extend by as much as 360 calendar days!
The amount covered after making business interruption insurance claims can vary greatly. It all depends on how much you ordinarily make. For this reason, you’ll need to have your financial records in order and on hand when you buy a policy.
Every business interruption insurance claim example will include the following:
- Financial records
- Documents that state when the business shut down
- A document indicating the reason for the temporary closure
There may be others depending on your insurance provider. The point is this: you’ll have to prove what your business stands to lose during closure. This holds true for whatever the amount you wish to be covered for is. Do this, and your business interruption insurance claim will be successful.
Once you have filed a claim, expect a waiting period. The usual waiting period is about 48 to 72 hours.
Do I Need Business Interruption Insurance Coverage?
The short answer to this is “yes!”. And we’re not just saying that because we’re an insurance company.
Big or small, every business can close for an indefinite time. During the closure, you and your employees will be robbed of that source of income.
This is why you’ll need a way to ensure that this doesn’t happen when your business shuts down. Even if you think things are going well, it always pays to be prepared. With business interruption insurance, you can receive money for the losses you may incur while your business “hibernates.”
For example, hundreds of thousands of businesses have closed in the US due to COVID-19. Needless to say, these businesses make no income to pay their employees, left with no other alternative but to let go of them.
If you have a business that closed down due to the pandemic, you might be able to invoke your business interruption insurance depending on your policy, the courts, and the state your business is in. Your policy might cover your projected losses for a month. Should you successfully get an endorsement, you might even be covered for a whole year!
How Much Is Business Interruption Insurance?
There are wide variations in the costs of business interruption insurance. We’ll get into those factors later on. For now, you can set the national average at just under $1,300 per policy yearly.
Again, this is the national average. Being the mean, this figure may not be your business interruption insurance premium. Yours may be higher or lower depending on these two main factors.
The Location of Your Business
The location of your business can tell your insurance provider about risks. The higher the risk associated with your business address, the higher your premium might be. Factoring your location in, your insurance provider might require you to pay only $700 a year for being in a fairly safe area.
In a flood-prone area like North Carolina, your business interruption insurance premium may be about $1,000 annually. See how it works?
The Size of Your Business
It’s simple; the bigger your business, the more coverage you’ll need in the event of closure. The smaller your business is, the less coverage you’ll need.
This is why you need to speak to a trusted insurance provider. And you’ll have to do some “fortune-telling” on your part to anticipate what you want to have covered and how much.
Protect Your Business Further With Business Interruption Insurance!
Your business, employees, and yourself can do with a bit of protection when things go wrong. For situations that can shut down your operations, get yourself a comprehensive business interruption insurance policy! For insurance for your business and everything else, look no further than ALLCHOICE Insurance!
Does interruption insurance cover seasonal businesses that are open spring, summer and fall but have to close during the winter months due to cold weather?
Possibly, Business Interruption Insurance can provide coverage for seasonal businesses that experience closures during specific times, such as winter months due to cold weather. This coverage is designed to help businesses recover financial losses resulting from a temporary shutdown. It’s crucial to review the policy details, including any specific conditions or limitations related to seasonal closures. If you have more questions or need assistance tailoring coverage to your business needs, feel free to reach out. We’re here to help you navigate the complexities of business insurance.