2014

Business Interruption Coverage in Property Insurance

The competitive and conscientious small business owner has an array of potential problems to be anxious about. Simple daily operational activities such as managing sales, preserving product availability, and maintaining equipment can all take up a good amount of time. However, it's the unforeseen concerns that can often become a major risk. Risks such as fires and floods can pose a huge threat to not only the business's building and its contents, but to the entire operation of the company as well. A comprehensive small business insurance plan can help cover the extensive costs of a disaster, and can keep a business afloat while repairs are made to the damaged property.

Property insurance should be a main part of a small business insurance risk management plan for any company with physical property that is used for business purposes. Business property insurance does more than just insure coverage for disasters such as floods, fires, or storms. Instead, business property insurance is vital in case of criminal activity, a sudden loss of use of the building, or any unrecognized health and safety issues on the property.

What is Business Interruption Insurance?

Though general business property insurance covers direct loss of property, it may not cover loss of income that is due to ongoing repairs on the property. Business interruption insurance offers coverage for any loss of income while property is being repaired or replaced. Any forced closing of a business as a result of a covered property claim is considered an interruption of business, and warrants the implementation of the insurance policy. Therefore, business interruption insurance reimburses a business for loss of profits during a forced closing of their operational facilities.

What Does Business Interruption Provide?

Business interruption insurance coverage provides a business with supplemental income for a specified period of time until business operations are back to normal. Thus, if a business was making $50,000 a month while open, and now they are only making $5,000 because their place of business is closed, business interruption would pay out $45,000 to that particular business. This may cover a business's normal everyday expenses such as salaries, taxes, and other operational costs. Additional expense coverage is typically combined with business interruption to address extraordinary expenses associated with the reopening business, which may include overtime pay, purchase of extra equipment, and other unforeseen costs. Business interruption insurance can also protect a company from any property losses of another business that they rely on. Thus, if company "A" relied on company "B" to supply them with a certain product, and company "B" had a fire and could not do business, then company "A" could be covered for any loss due to company "B's" lack of supply.

Types of Businesses that Need Business Interruption Insurance

Although many small business owners often overlook business interruption insurance, it can be imperative to the function of a business during a disaster. Every business should confirm that interruption insurance is included on to their current property insurance. Businesses that use dangerous machinery, chemicals, or anything else that could easily cause a fire or other damage to the property should certainly have a policy that covers costs in case of an emergency shutdown.

Business interruption insurance is typically included on a small business general liability and property package policy. Business interruption should be part of a comprehensive small business insurance plan that deals with risk management. It could keep your business from going bankrupt during a time of disaster.





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