One of the most vital types of business insurance that you can carry is business interruption insurance, commonly referred to as BII. Business interruption insurance is meant to cover loss of income if damage to your property makes it impossible to carry out your normal business operations. It is not commonly sold separately, but may be a clause that you can add to your business property insurance.
Why Consider Business Interruption Insurance?
Business owners often get insurance quotes for liability, casualty, and property insurance, yet they neglect to look into insurance coverage for business interruption. Property policies cover you against damage by fire and flood; casualty can cover against general loss; and liability coverage can protect your business against negligence claims. Worker's compensation coverage protects your business from injury claims caused on the job. But none of these specifically addresses the loss of income your business may face following damage that closes your doors.
The pivotal factor in considering business interruption insurance coverage lies in how much your operation depends on its physical location in producing income. Obviously, a service company with few client visits and little on-hand merchandise depends less on its brick and mortar office than does a restaurant or commercial sales operation with a warehouse. Even so, the loss of your computing operations at a small office due to fire, flood, or theft can halt business operations indefinitely.
What Is Business Interruption Insurance?
Business interruption insurance is usually supplemental insurance that you add to your umbrella business insurance coverage. In the event of the closure of retail or hospitality-based operations, your insurance company pays benefits to cover lost income during your downtime. Some insurance companies offer policies that provide extra benefits for interruptions that occur during peak periods, such as holiday shopping weeks or other seasonal sales dates.
Depending on the terms of the policy, you can receive coverage for losses caused by fires, floods, or other events that block operations or cut off strategic communications to your company. You can also seek quotes for coverage in case another company--upon which yours is directly dependent--goes dark under similar disasters and conditions. The "contingent coverage" can include stoppage caused by suppliers, shippers, or transportation firms.
Insurance if Services Fail
Depending on your carrier, business interruption insurance policies may also provide coverage if there is damage to airports, bridges, trains, and roads that offer vital access to your business location. You can get quotes for coverage if vital electricity, telephone, or Internet services are temporarily shut down.
Electrical or other power failures to businesses that serve or warehouse food, for example, may cause severe setbacks or closures and loss. Perhaps a natural disaster destroys telephone lines that connect your business to your customers or suppliers. Would you need insurance then against loss of income?
Is It Time to Get Coverage?
Carriers offer a wide range of umbrella coverage as well as supplemental insurance plans to match the needs of your business. Some owners enter into single-year policies based on their ability to make premium payments. You could try it for a year as you evaluate your business practices, your working environment, and your dependence on peripheral companies.
Insurance companies base interruption coverage on historical business performance during the calendar year. Premiums are based on risk, but there may be more risk in not paying them. If a disaster shuts you down during a critical time, business interruption coverage can help you land on your feet--and not having it could mean closing your doors forever.
