What Is Business Interruption Insurance?

Are you unsure which types of insurance your commercial business needs? If your business takes place in a traditional brick and mortar building, you’ll definitely want to discuss Business interruption insurance (or BI). It is extremely important to add to your risk management portfolio.

What is business interruption insurance? It basically acts as coverage if your business closes for covered reasons so that you can meet payroll, pay rent on your facility, and etc. There is generally a 72 hour waiting period (think of it as your deductible) and at the 73rd hour, you should be covered.

Unfortunately with this type of insurance, people expect everything to be covered and are surprised when it’s not. For example, if a power outage occurs 3 miles away that would be a situation that regrettably, would not be covered.

If you take nothing else from this video, make sure that you talk to your individual insurance agent about ‘off property coverage’.

Most businesses operate in a facility they own or rent. If your business is mobile or operates using the internet at home, you might not need this type of coverage (but don’t count it out yet!).

There is also something called ‘extra expense’ which functions as an overflow of cash to get you back on your feet as soon as possible. It might allow a business to temporarily rent a different office so they can operate as normal.

These extra policies are written as ‘actual loss sustained’ or ‘fraction thereof’ basis.

ALS has an auditor look at your financials, calculate what you’d have made depending on previous months, and cut a check for that amount of loss.

Fraction thereof is where you pick an amount and divide it over monthly payments.

Which of these you choose depends on what your agent offers and what makes sense for your business.

Who needs it? Possibly everyone. As we said above, if you’re a gig worker or mainly mobile for work, it might not make sense. But in person stores that rely on foot traffic, it’s extremely important to have this type of coverage.

The important thing is to talk to your independent insurance agent about what you may need and your options. If you’re purchasing business insurance we highly recommend mentioning off-property coverage. Please don’t be caught with financial losses because of a transformer that has nothing to do with your business.
If you don’t have an agent, we are always here to help. Call us today to figure out what types of insurance work best for your business.