Business interruption insurance is a type of insurance coverage that replaces lost revenue that a business incurs when its operations are interrupted by an event such as flood, blizzard, fire or other unforeseeable event. Insurers frequently include business interruption coverage as part of a property and casualty policy or in a comprehensive business coverage policy. While the property and casualty coverages help the business rebuild after a disaster, the interruption insurance replaces the lost revenue from the interruption based on the business’s past income during a similar time period.While most business owners would never start their venture without purchasing property insurance, too many of them neglect to think of how they would cope with the loss of income that would result if their business site were temporarily unavailable. The loss of revenue during the rebuilding process could be as devastating to a business’s future as the damage from the disaster itself. The policy also covers the company’s operating expenses, such as utility bills, during the interruption to ensure that the company does not fall behind in its obligations.
Business interruption insurance reimburses the business for that lost revenue and enables the business to continue when it becomes fully operational again. Businesses can file a claim on their business interruption insurance coverage at the same time they file their claims for property damage covered by the comprehensive policy. If the interruption is not due to a cause covered under the property policy, the claim will likely be denied. Businesses can also deduct their business interruption insurance premiums on their company’s income taxes as ordinary business expenses.
Business owners should be aware of the limits on their business interruption insurance to make sure that the policy limits provide adequate revenue to see the company through an extended shutdown. Policy limits should provide at least two to four weeks of revenue, giving the company adequate time to recover, clean up and rebuild.
