Business

What is Business Interruption Insurance?

Continuity is critical in business, and there’s a few things more important than continuous revenue and cash flow, particularly for small to medium-sized organizations.

In fact, just one brief business interruption can be incredibly costly for an organization, often leading to serious reputational damages and long-term closures.

That’s where business interruption insurance can help.

What is Business Interruption Insurance?

Business interruption insurance provides protection against a variety of common interruptions, including natural disasters, equipment damage and vandalism.

For example, let’s say you’re a small, family-owned bagel shop. Following a recent fire, you experienced major damage to your property. Not only were substantial repairs needed, but you lost crucial baking equipment.

Repairs for the damaged property and equipment were expected to take three months – a significant amount of lost time and revenue to your business.

Here’s how business interruption insurance could work in action: Following the covered disruption, business interruption can help your business stay afloat and recover quickly. This coverage can reimburse income your organization may have received had you been able to operate during that time.

Paying for costly repairs without having a steady flow of income could potentially bankrupt your bagel shop.

With the right policy, your bagel shop could take the necessary steps to get back up and running, all without sacrificing the loss of day-to-day income.

Let’s look at another example…

Let’s say you’re a mid-sized auto dealership.

After a night of severe flooding, a number of area businesses experienced substantial water damage. Of these businesses, you were hit the hardest, losing the majority of your inventory.

In addition, because the lot was flooded, your dealership had to move its operations to a new location. This, in turn, meant that you had to sign a new lease and cover steep moving expenses.

Here’s how business interruption insurance could work in action: In the face of a disaster or other disruption, organizations may be forced to move locations in order to remain open. Without the proper insurance policy in place, organizations would have to pay for these costs out of pocket.

Thankfully, business interruption insurance can reimburse your company for all of the costs associated with a move.

Top Benefits of Business Interruption Insurance

Here’s the top benefits of business interruption insurance:

Revenue: in the event of a disruption, business interruption insurance provides coverage for income your business would have earned during a closure period if it had been operating normally.

Rent or lease payments: Even if your premises are unusable following a disaster or other event, many leases still require that you make payments. Business interruption insurance allows you to continue making rent or lease payments, even while your business is not operating.

Relocation: In the event that your primary location is unusable following a disaster or other event, you will likely have to relocate in order to remain open and continue generating revenue. Business interruption insurance can cover the expenses of moving your business to a temporary location and may include both moving and rent costs.

Employee wages: If you’re unable to operate, it’s likely you will not be able to continue paying employees. Business interruption insurance can help you avoid losing staff while you’re closed by ensuring that you make payroll.

Loan payments: If you’ve had an outstanding loan, you will need to continue to make payments even if your business isn’t fully operational. Business interruption insurance will ensure you never miss a payment until you are fully operational again.

Want to learn more about Business Interruption Insurance?

Business interruption insurance is designed to give your business access to the assets you need when you need them most.

…but these policies can be complex, and it’s important to work with your insurance agent closely when seeking coverage.

To learn more about Business Interruption Insurance, call us at O’Neill Insurance at (330) 334-1561 or email insurance@oneillinsurance.com and ask to speak with one of our Risk Advisors.

Or, click below to request a quote!

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Components of this article were adapted from Zywave. This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.