Business Interruption Insurance

Business interruption insurance replaces lost income (and potentially other expenses) when a business is closed due to a disaster that results in physical damage to the business such as a fire or storm. Typically, this is not a standalone policy, but rather is an add on to a commercial property policy or part of a package policy such as a Business Owner’s Policy (BOP) or Commercial Package Policy. (CPP)

It is important to note that Business Interruption policies typically have specific exclusions. For instance, even all-risk insurance plans tend to have exclusions for losses due to viruses or bacteria. This includes instances of the government mandating (Civil Authority) a business close due to a pandemic. Since the root cause is a virus the policy would not be reimbursed for the resulting lost income.

Coverage Benefits

Depending on your policy your coverage may include:

Fixed Costs – operating expenses and other incurred costs
Extra Expense – reasonable expenses outside the norm that the business incurs to continue operations while repairs are made.
Employee Wages – covers wages of employees while business is shut down or unable to operate
Profits – typically based on the month prior to the loss
Taxes – when taxes are due, they are expected to be paid – even if your business is shut down.
Loans – while some banks may work with you regarding payments while your business is shut down, it is not a guarantee and likely repayment will continue to be do even if you are not generating income.
Temporary Location – some policies cover costs of having to move and operate from a temporary location
Training Costs – if old equipment needs to be replaced due to the claim event, the policy may include costs to train employees on new equipment
Civil Authority – A covered business interruption event causes the government to mandate a business be closed which results in financial loss. For example, if the street is closed due to damage caused by a tornado.