What is Business Interruption Coverage?

Business Interruption Coverage

When thinking about business insurance, most people think about protecting their business from fire, windstorms, or burglary. While this type of insurance is obviously important and necessary, it’s also essential to consider the broader implications of temporarily closing your business.

Can your business sustain itself financially without the income from regular customers during the rebuilding process? That’s where business interruption coverage, also known as business income coverage or income protection coverage, becomes crucial.

business interruption insurance

So, what is Business Interruption Coverage exactly?

Business interruption coverage provides compensation for lost income when your business is temporarily closed due to a covered loss as outlined in your business policy. This coverage ensures that you are financially protected from the income you would have otherwise earned during a partial or total interruption. The coverage period for business interruption begins on the date of the loss to the covered property and continues until the covered property is repaired, rebuilt, or replaced in a reasonable timeframe and with similar quality. During this period, your insurance policy will reimburse you for the income you would have generated had your business been operational.

What is covered by Business Interruption Insurance?

If a covered loss forces your business to shut down, your interruption insurance can help cover your operating expenses, like:
  • Revenue you’d normally make if your business was open.
  • Mortgage, rent and lease payments for the space your business operates from.
  • Loan payments that you need to make during that time.
  • Taxes, whether you pay them monthly or quarterly.
  • Payroll for your employees.
  • Relocation costs if you have to move to a new or temporary location because of physical damages.
  • Extra expenses if, for example, you need to rent another space to temporarily run your business after a covered loss.
  • Training costs for employees to learn how to use new machinery or equipment after a covered loss.

Here’s what is NOT covered:

  • Broken items resulting from a covered event or loss.
  • Flood or earthquake damage, which you’ll need a separate policy for.
  • Undocumented income that’s not listed on your business’ financial records. 
  • Utilities, because they’re usually turned off when your business closes due to damage.
  • Communicable diseases that cause a shutdown in your operation.

How much does this coverage cost?

The cost of your business interruption or business income coverage can be influenced by several factors, including:

1. Industry: Different industries have varying levels of risk and potential for interruption. Insurance providers take this into account when determining the cost of coverage.

2. Number of employees: The size of your workforce can impact the potential financial impact of a business interruption. More employees may result in higher coverage costs.

3. Amount of coverage: The level of coverage you choose will affect the cost of your policy. Higher coverage limits typically come with higher premiums. Additionally, costs can vary based on your location and the risk of covered perils or losses. For instance, if your business is situated in an area prone to wildfires, the cost of business interruption insurance may be higher. Similarly, businesses located in regions with an increased risk of natural disasters like hurricanes may face higher coverage costs compared to those located inland.

It’s important to work with an insurance provider (like Holley Insurance!) who can assess your specific circumstances and provide you with accurate cost estimates tailored to your business’s needs and risk profile.

Insurance for Businesses of All Sizes

Holley Insurance is proud to help business owners protect what they have worked so hard to build.
We’ve got an incredible team of business insurance experts ready to help businesses of all sizes. No matter how big or small your business, Holley Insurance is here to protect it.
Can we help your business too? Request your complimentary business insurance review here.
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A little more about Holley Insurance…

Holley Insurance was founded in 2000, and retains a core base of loyal clients. We have locations in Roanoke, Rocky Mount, and Forest, VA. As an independent insurance agency, Holley Insurance represents a carefully selected group of financially strong, reputable insurance companies. Therefore, we are able to offer you the best coverage at the most competitive price. Holley Insurance was named “Top Insurance Broker in Southwest Virginia” by Virginia Living Magazine for 2021. If you’re interested in starting a quote online or having us take a look at your current policies, click here!

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