The concept of business continuity is one of the keys that separate reliable and resilient enterprises from those that sputter and struggle to stay afloat. Large companies are often in the best position to invest in protections that keep a business going in a crisis. However, any firm can experience disruption at some point, which is why business interruption insurance is a worthwhile protection strategy.
What Does Business Interruption Insurance Cover?
Business interruption insurance is often a part of a business owner’s policy (BOP) coverage. BOP plans are typically tailored for companies with 100 employees or less, earning under $5 million. It’s usually cheaper to purchase business interruption insurance as part of an insurance package such as BOP than buying it as a stand-alone plan.
If your company is forced to shut down due to loss of your location or inability to open for business, business interruption insurance will pay for lost revenue/wages, or rental income. Only certain types of perils, however, are covered. It typically doesn’t cover shutdowns due to flood or earthquake disasters, which require separate insurance. Nor does it apply to the pandemic. You have to read the policy carefully to know exactly what it covers.
How Much Business Interruption Coverage Is Sufficient?
Several factors determine how much business interruption coverage is necessary for a particular company. The type of industry and number of employees are the two most crucial factors. The amount of coverage you need reflects the risk levels involved in the operation. Business Interruption is generally offered as a fixed amount, or a fixed period in months. There is also an option for extra expenses such as relocation costs, changing of advertising and business forms to a new address, and rent differential. When deciding on an amount of coverage, consider the time to recover lost business when and where you reopen. Business interruption can make up the income difference during a recovery period only if you factor in your ramp up time. It’s helpful to use your company’s annual gross revenue and future projections as references for determining insurance costs and coverage.
Cost of Business Interruption Insurance
Each business has its own unique insurance needs, which is why it’s best to customize your policy. The main factors that affect a business interruption policy’s monthly premiums are similar to insurance policies across the board. These considerations include location, company size, and income. Your company history and the number of claims you’ve filed in the past also impact costs.
Perils and items that aren’t covered in a basic BOP or commercial general liability plan can be covered as add-ons called endorsements. There might not be an insurance policy for every possible disaster, but many different types of perils can be addressed with special endorsements.
Business income coverage can be availed as an endorsement for suppliers, product buyers, product manufacturers, and drivers. Department stores and entertainment venues commonly tap into this type of insurance.
Keeping income flowing even when a business has to temporarily halt its operation is what business interruption insurance does. Contact us at Lou Aggetta Insurance to get customized insurance coverage for your company that will protect your business income at all times.