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Business Interruption Insurance: What You Need to Know

If a tree falls through your roof, or a fire damages part of your company’s building, commercial property insurance is there to help foot the costs of repairs.

However, business interruption insurance is there to cover what comes next.

If you’re lucky, a natural disaster will only knock out nonessential aspects, allowing you to continue business as usual. But many people that face disaster are rarely so lucky. Some might have to cease operations for a day or two. Other businesses might be out of commission for weeks on end. And if the business isn’t running, the business isn’t making money.

Business interruption insurance, or business income insurance, fills gaps like these. If your company must temporarily close due to certain types of disasters — whether it’s directly damaged, or even if access to your business is, say, impeded by governmental cleanup efforts — this insurance will assist in several ways that commercial property insurance can’t.

What Business Interruption Insurance Covers

Here’s a quick look at several of the items that business interruption insurance should take care of when disaster strikes.

Lost profits

This is the big one. Time lost is money lost, and business interruption helps you reclaim that by reimbursing you for profits you likely have missed out on because of disaster. This figure typically is determined based on figures from prior months.

Mortgage/rent and utilities

It’s possible that your landlord and/or utility providers might provide some sort of temporary rent relief in the event of a disaster. But business interruption insurance will ensure that you don’t need to sweat that decision.

Loan payments

Similarly, your lenders might cut you some slack, but again, business income insurance will make sure that’s not necessary.

Taxes

The IRS is unlikely to provide you with tax relief in the event of a disaster. Fortunately, business interruption insurance will ensure that you remain on the tax man’s good side.

Payroll

One of the easiest (and worst) ways to lose employees is being unable to pay them because a disaster is keeping your business from making money. But business income insurance will keep your workers paid, too, which will help reopening go far more smoothly.

Training

In some cases, you might need to replace older, damaged equipment with a newer model. Should your personnel need trained up on those changes, business interruption insurance covers those costs.

Relocation costs

You might need to set up shop elsewhere because keeping your business closed for a prolonged amount of time simply isn’t an option. Business interruption will tackle related costs.

What It Doesn’t Do

Business interruption insurance is a worthwhile product that covers a great many things, but it’s not a cure-all for every ill.

For one, it doesn’t cover every type of disaster. It will handle events such as fires and wind damage, but other natural disasters such as earthquakes and floods often don’t make the list. And as mentioned before: It’s not a replacement for commercial property insurance, which will compensate you for actual physical repairs.

Still, it’s clear that business interruption insurance is something many businesses can’t afford to ignore. And if you agree, keep McManamon & Co. in the event you ever have to cash in on one of these policies. That’s because among the services we provide to small and midsize businesses, we provide economic damages consulting — independent, objective assessment and/or analysis of what’s truly been lost in the event of a disaster.

Do you want to know more about business interruption insurance? Get in touch with us today. Call us at 440.892.9088 or contact us online.

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