Business Interruption Insurance: Your Key to Continuity When Disaster Strikes

Topics: Business Owner's Policy Small Business Advice

Imagine this scenario: A severe storm is headed in your direction. You have your emergency action plan in place, and you recently reviewed your business insurance needs with your agent. So your bases are covered if the storm causes significant damage to your business, right?

The answer is most likely yes, but have you considered what might happen if you cannot reopen your business for an extended period of time? Whether your small business is the victim of a catastrophic storm or even a cyber attack, business interruption insurance can help keep your small business above water until you’re totally up and running again.


Business Interruption Insurance-Are You Ready if Disaster Strikes Your Business?


What is Business Interruption Insurance and What Does it Cover?


Business interruption coverage protects you when some event—storms, hacking or another unforeseen circumstance—temporarily disrupts your ability to sell or interact with your customers and other interested parties. It can replace money you would have earned through those interactions and provide funds to operate in a temporary location. It is normally offered as part of a Businessowner’s Policy or commercial property insurance policy.


Does business interruption insurance cover payroll?


Business interruption insurance covers lost net income, temporary relocation expenses and ongoing expenses such as payroll, caused by the business being temporarily sidelined. This coverage is critical to keep your business going, but the tricky part is figuring out how much coverage is necessary.

“Many business owners are aware of business interruption insurance and how it works. But they tend to underestimate their coverage needs,” reports Brian Hosey, VP of Underwriting for AmTrust North America.

“A lot of times, manufacturers, for example, underestimate the time it takes to get replacement machinery. Many machines are customized, and so business interruption turns from weeks into months,” he adds.

Can you cover payroll and other expenses while your business income is stalled? Does your business have the reserves to get through six months to a year without its normal revenue stream?

If the answer is no, then consider binding a business interruption insurance policy with coverage in the right amount to carry the business through the period of suspended operations. This policy will provide you with the peace of mind that your business will rebuild and be back to business as usual as soon as possible.

Keep in mind that, like any insurance, certain criteria has to be met before the coverage comes into play. For more information on limitations, refer to this Business Interruption Insurance fact sheet provided by the American Insurance Association.


Getting back to business


For quick steps to take to minimize a disaster’s effect on your business continuity, check out: Getting Back to Business, provided by The Insurance Institute for Business & Home Safety (IBHS). The brochure lists many resources available to help in this process (see “Additional Resources”) as well as how to work with your insurance company’s representatives. Insurance professionals are experienced in helping businesses recover from disasters and will have specific advice pertaining to your losses, coverage and recovery.

For more information on business interruption insurance, contact AmTrust Financial Services or your AmTrust-appointed agent.

*IBHS is an independent, nonprofit, scientific and educational organization supported by the property insurance industry. The organization works to reduce the social and economic effects of natural disasters and other risks to residential and commercial property by conducting research and advocating improved construction, maintenance and preparation practices.

This material is for informational purposes only. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages vary by location. Contact your local RSM for more information.
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