Business interruption insurance is a useful tool for when an accident, disaster or mandate leaves your business unable to operate at full capacity. This insurance helps your business meet financial obligations when no income is coming in so that you can hopefully avoid debts and cancellations.
One of the benefits under business interruption insurance is payroll. For example, say that a fire breaks out in your offices and damages the majority of the building and its contents, leaving your business without a physical location and most of its computers. Since your employees are unable to return to work, if only remotely, business interruption insurance can help your business maintain payroll even while the business is ground to a halt.
One of the few exceptions is for employees who are unable to work due to an injury. If an employee is out because of a work-related injury, their expenses and wages should be covered under workers compensation.
Does Business Interruption Insurance Cover Damages to the Business?
On its own, business interruption insurance does not cover the actual damages your business faces. Branching off of the earlier example, business interruption insurance will not provide coverage for the damages caused. Instead, you will need commercial property damage.
Commercial property damage covers physical damage to your business’ property and its contents caused by fire, wind, hail, lightning, smoke, theft, vandalism and more. This insurance may typically come with business interruption insurance, but not always. Be sure to speak with your insurance agent about ensuring that your insurance policy has business interruption insurance.
Aside from wages, business interruption insurance can also cover:
- Rent and lease payments
- Lost income
- Loan payments
- Relocation costs
For example, if you are renting a new area after a disaster destroys the original one, business interruption insurance can cover the cost of relocating.
How Much is Business Interruption Insurance?
The cost of business interruption insurance varies primarily depending on the size of your business, such as its annual income and payroll. Speak with your insurance agent about how much your business interruption insurance may cost based on the different aspects of your business. Not all policies are created equal and you will need one tailored to suit your business’ needs.
You can also bundle the mentioned insurance policies into a business owners policy (BOP), which combines reliable coverages into a single and more affordable commercial insurance policy.