Business Interruption Insurance

What Business Interruption Insurance Usually Covers

• Revenue. This is the income your business would have earned during the closure period if it were operating normally.
• Rent or lease payments. Many leases require the renter to continue making payments even if the premises become unusable. Most also exclude renters from any insurance a landlord has, so you need to rely on your own coverage.
• Relocation. This is the expense of moving your business to a temporary location and may include both moving and rent costs.
• Employee wages. This is essential if you don’t want to lose employees while you’re shut down. Your coverage can help you make payroll when you’re unable to operate.
• Taxes. The taxman doesn’t stop collecting, even when disaster hits. This can help you pay your taxes on time.
• Loan payments. Loan payments are often due monthly, so your coverage can help you make those payments even when you can’t generate income.
• Losses caused by covered damage that prevents access to a building. For example, this coverage can help out when the government implements a citywide curfew or other restrictions that keep people away from your business. This is usually called “civil authority coverage” or “loss of ingress or egress.”

What Business Interruption Insurance Usually Doesn't Cover

• Utilities. In most cases, utilities aren’t covered because utility service typically shuts off when the location can’t be used for business.
• Income that isn’t documented. If your business is steadily growing, it’s important to document several months of revenue so the insurance company can compensate you adequately. You won’t be reimbursed for income that’s unaccounted for.
• Losses from partial closures. If access to your business is limited but not completely eliminated by property damage, you usually can’t receive Business Interruption benefits. For example, say a windstorm causes a tree to fall onto your business’s stockroom. While your stockroom’s roof needs repairs, you’re still able operate and remain open for customers.
• Losses from closures caused by non-covered damages. As mentioned earlier, most Property Insurance policies don’t cover flood damage. The same goes for earthquake damage. And remember, you can’t receive income coverage when you voluntarily close (e.g., for a family emergency or vacation).
• Closures from downed power lines. If a storm or accident results in downed power lines, most closures are not covered. Power outages are a common occurrence, making it a difficult risk to insure because it affects so many people. Power is typically restored quickly, and most Business Interruption policies require a business to be shut down for at least 72 hours before benefits kick in.