Business Interruption Insurance: What's Covered, What's Not

Topics: Small Business

Business interruption insurance is targeted insurance coverage that protects business owners from potentially devastating financial losses resulting from an unforeseen disruption of normal business operations. Covered disruptions might have any number of causes. Some typical examples include fire, vandalism, storms, equipment breakdown and other unexpected delays, such as those caused by illness or supply chain issues.

When a covered event happens — which they unfortunately do — and your business is impeded or temporarily shut down, business interruption insurance provides timely financial compensation to policyholders for the revenue and income you would have collected during the unexpected interruption. Depending on policy and coverage limits, the compensation can continue for the duration of the event. The goal is to get critical operational expenses paid on time and in full during an emergency. If you have the right coverage, you'll be able to reopen at full capacity as soon as possible with a minimum of financial hardship.

As a small business owner, you've made a significant investment of both time and money into your business. Business interruption insurance is designed to protect that investment by providing financial support when it's most needed.


What Does Business Interruption Insurance Cover?

Business interruption coverage, also called loss of business income insurance, is designed to protect you when an unforeseen event, such as a storm, a cyberattack, a criminal act, or an outbreak of the seasonal flu, hurts your ability to do business with your customers in a normal way. It supplements or replaces the lost money you otherwise would have earned. It can also provide funds that you can use to keep operating under such strained circumstances (for example, from a temporary location).

Your coverage will vary depending on the policy options you choose, but here are some examples of covered expenses:
  • Lost profit: Compensation for income you would have earned if a covered disruption didn't happen.
  • Ongoing operations: Financial reimbursement for regular expenses, such as employee wages, rent, maintenance, equipment leases, public utilities and loan or bond payments.
  • Extras: Compensation for expenses directly related to your recovery from a covered event. These might include hiring extra staff, renting temporary machinery, replacing damaged equipment or other "extras."
  • Relocation: Coverage for costs associated with renting a temporary office or industrial space while yours is being repaired or until access is otherwise restored.
  • Training: If you have to pay for additional training that might be necessary for your employees to adapt to a new location or learn to use new equipment, those costs may be covered.
  • Taxes: Coverage for taxes, dues, and fees that you are unable to pay due to a covered work stoppage.
  • Mortgages: Coverage for interest and principal payments on commercial mortgage loans that come due during a disruption.

What Is Not Covered by Business Interruption Insurance?

There are probably a thousand things that can bring your business to a halt. As we've seen, a comprehensive business interruption policy covers many of them. However, not everything that can shut your company down falls under the business interruption insurance umbrella.

The policy you purchase dictates precise coverage levels. To avoid being underinsured, it's critical to read your contract thoroughly and review all terms and conditions.

Remember, however, that supplementary coverage to protect against otherwise uncovered incidents may be available. A knowledgeable, professional insurance agent with experience in property insurance can be an excellent resource.

Generally, the following items are not covered:
  • Civil unrest: It's difficult for insurance companies to insure against things like riots, acts of terrorism, and civil unrest. Many business interruption policies exclude these types of incidents.
  • Pandemics: It's possible to obtain loss of business income insurance for outbreaks of certain diseases or seasonal illnesses, but out-of-the-ordinary occurrences like declared pandemics are generally not covered.
  • Government-mandated shutdowns: If a government, municipality, or other civil authority mandates your business be closed, that interruption may not be covered. Examples might be a road closure to replace drainpipes or a mandatory work stoppage due to an accident or other damage nearby.
  • Some acts of nature: While some natural disasters are covered, others are not. Floods and earthquakes are generally excluded. Again, read your contract or ask your agent to be sure.
  • Routine utility outages: Business owners can't count on coverage for routine electricity or Wi-Fi outages that sometimes occur.

AmTrust Business Interruption Insurance

Our experienced agents and partners are highly knowledgeable and available to develop a loss of business income policy suited to your business needs. Both our Businessowners Policy and our Commercial Package include business interruption coverage. You'll find our premiums extremely competitive, especially when you consider we can offer multiple discounts and credits to businesspeople who purchase additional types of coverage.

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