Business Interruption Insurance
Business Interruption Insurance, or Business Income Insurance, is one of the most important coverage for a business, but is most often overlooked. It is the coverage that will keep a business up and running or restore it after an event, such as a fire, hurricane or earthquake. Business Interruption Insurance is not a stand-alone policy, but is rather an add-on provision to a comprehensive policy. This coverage will not compensate the physical damage to the business; it covers the profits that would have been made during the period of interruption. Business owners should be certain they inquire about this add-on while getting a cheap insurance quote from their provider.
Business Interruption Insurance may vary from company to company, but will basically cover the following:
• Business Profits – Verified by the businesses prior accounts receivable and/or financial statements
• Operation Expenses – This is determined by previous accounts payable records, such as electricity, phone and/or water bills
• Temporary Operating Costs – Expenses incurred due to operating out of a temporary location while business is being repaired/rebuilt
Due to the volume of insurance companies, it is best for the owner to get further details on what the plan will cover while getting their cheap insurance quote when first obtaining business insurance or adding the Business Interruption Insurance provision to an existing policy. However, regardless of the company, it will only cover the interruption period which is usually defined as the first day of damage through the first day of restored normal operating conditions.
Again, to purchase Business Interruption Insurance is imperative for any business, especially small businesses and it is not a stand-alone policy. This must simply be added to a property or comprehensive policy as an add-on. Owners should be sure it will cover the entire interruption period and not limit the time too severely as to not allow sufficient time to recover. Also, the cost of this coverage will correlate to the projected risk, such as location, business type, and so forth. Therefore, it is important to shop around for a cheap insurance quote to be most cost effective.
Extra Expense Insurance
For service oriented businesses, an option in lieu of Business Interruption Insurance is Extra Expense Insurance. This is for those businesses that cannot afford to close for repairs and must relocate to a temporary location in order to keep from going out of business. For example, restaurants, telemarketers, dry cleaners, and such would not do well to close while the physical damages to their building/structures are being repaired. So the better choice may be Extra Expense Insurance.
Both coverage are very similar and one way to distinguish between them is that Business Interruption Insurance will cover what the business could have made while closed for repairs/rebuild. Extra Expense Insurance will cover rent at a temporary location to keep the business open while repairs are being done. Both are important and should be discussed with the owner’s insurance provider to choose the best one for their coverage needs, as no business should be without one or the other.