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Business interruption insurance is also called business income protection. Find out about business interruption insurance with help from the president of A.L. Saland Insurance Solutions in this free video clip.
Business owners or managers purchase business interruption insurance as a way to reduce risk. With business interruption insurance, a business has protection from financial damages that may result from events that the business can not control. For example, if a natural disaster knocks out the electrical power in an area, a business may temporary close. In this case, business interruption insurance would cover a portion of the profits that the business may lose.
Business interruption insurance is sold as an addition to a property insurance policy or as a part of a policy package and therefore is a form of casualty insurance. Property and casualty insurance restores the policyholder's possessions, including her home, automobiles, business equipment and other property. It also pays for legal fees associated with liability suits and claims. Business owners would greatly benefit from interruption insurance if a loss caused their business to temporarily shut down.
Business operations are subject to interruptions due to unforeseen circumstances. Fire, natural disaster, industrial accidents or similar circumstances can have a significant impact on continuity of services and business income. Closing a business for restoration, other than a brief power outage, can put the business in an unknown status. Vital to economic existence, business interruption insurance is necessary for every company’s business portfolio.
If a business has a temporary shutdown due to fire or other insured peril, business interruption insurance can be invaluable. Business interruption insurance generally insures loss of net profits and continuing expenses. It can also pay for expenses incurred if the business has to move to another location due to a covered insurance event. (See References 1.) This type of insurance is also known as profits insurance or income insurance. Business interruption insurance is not sold as a policy by itself but is usually part of a property insurance or business owners policy. (See Reference 2)
Business interruption insurance is a type of coverage offered with a commercial general liability policy. The purpose of business interruption insurance is to provide funds in the event that your business suffers damage or some other loss that requires it to close for a short time. This insurance provides enough coverage to aid in the restoration process, to pay wages to yourself and important employees and to keep current with bills and other costs until your business can reopen.
Business interruption insurance is for companies that have been struck by a natural disaster and are shut down for an extended period of time as a result. Companies affected by the 2001 terrorist attacks on the World Trade Center, Hurricane Katrina or other natural disasters such as fires, tornadoes or rain damage use business interruption insurance to cover costs while they rebuild. This coverage can mean the difference between staying in business and closing the doors for good.
To file a claim for business interruption insurance, contact your agent right after the incident or damage occurs. Any burglaries should also be reported to the police immediately. Know what your specific policy requires of you, like photo documentation or professional repair estimates and evaluations.
Business interruption insurance is both a sound and necessary investment. If an unexpected event causes your business to be closed for a long time, business interruption insurance can help cover necessary costs and provide some income. Without knowing how long your business will be closed or for what reason can make it difficult to determine how much business interruption insurance you should carry. There are, however, some standard things to consider in order to figure out how much is needed.
A flood can cause a tremendous amount of damage, leaving business owners drowning in a sea of financial outlay. If a flood were to damage your business so severely that it can't stay open, it's important to know you have some sort of business interruption insurance to help float some of those costs. Unfortunately, not all business interruption insurance policies cover flood damage. Before you face a flood, you should determine how your policy protects you in such a disaster.
