Business Interruption

Business Interruption Insurance

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Business interruption insurance protects a business owner against losses resulting from a temporary shutdown because of fire or other insured peril. Generally, business interruption insurance provides reimbursement for lost net profits and necessary continuing expenses. There are various types of business interruption coverage available. A business interruption policy that includes extra expense coverage in case you have to carry on business at a different location because of insured damage at your original place of business can be a wise business insurance investment.

What Is Covered?

Coverage for business interruption includes income loss and, based on financial history, loss of revenue. If you must close the business due to an event such as a chemical leak, your policy pays for the anticipated income. Reimbursements for expenses are also covered, such as utilities, vendors and any other services required for operations. Expenses for operating at an alternate location may also apply during recovery.

How Much do you need?

Maintaining adequate coverage is important to keep your business running. A business interruption claim totaling $653,000 on a policy with a limit of $500,000 leaves $153,000 that has to be paid out of pocket. Insufficient limits can result in the business becoming responsible for paying any financial balance needed to restart operations. In addition to an interruption, high out-pocket-costs could prevent the restart of your company. Evaluating risk exposures should provide information on how much coverage is needed.

Deciding how much you need?

Risk management is critical when preparing a business insurance package. Knowing what aspects of the business are vulnerable tells decision makers what type of risk strategies may avoid over-expenditures. The level of risk for a demolition company is higher than risk levels for a coffee shop or deli, for instance. When risks are not evident, risk assessment tools assist in determining risk levels.

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