Worried About Lost Income? Understanding Business Interruption Insurance Coverage

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Did you know that 20% of small businesses fail in their first year? If you are a small business owner, we are sure you did not open your doors to fail within your first couple of years. Something that you will want to become educated on is coverage even when a disaster strikes.

This is why we put together this guide to help you learn more about business interruption insurance coverage.


What Is Business Interruption Insurance Coverage?

This insurance coverage replaces business income that is lost in a disaster. Disasters include things such as a natural disaster or a fire. Something else that this type of insurance covers is operating expenses, loan payments, payroll taxes, or a move to a temporary location. 

On rare occasions, this insurance will apply if a civil authority shuts down a business because of physical damage to businesses nearby. The one thing that this policy will not cover is if the business closes due to a pandemic. 

This type of insurance is added to a property/casual policy or is included in a comprehensive package policy as an add-on. This business insurance solution is not sold as an entirely separate policy like vehicle insurance or home insurance. 


What Is Not Covered?

There are several things that will not be covered under this policy, including broken items like glass, earthquake damage, flood damage, utilities, undocumented income that you do not have listed in your financial records. 

The insurer is only obligated to pay if you had a loss that resulted in interrupting your business operation. 


How Much Coverage Is Necessary?

The coverage limit with this insurance is the maximum amount that your insurer will pay towards a covered claim. Any financial losses that exceed the coverage amount you will be responsible for. 

When you are choosing the amount of coverage you want to take into consideration how long it will take your business to get back up and running after you suffer a loss. You also want to consider how well protected the building is that you rent out for your office space. 

How long will it take you to find a comparable commercial space to move to temporarily after a loss? These are all important questions when determining how much coverage to choose. Always choose an amount that will not leave you in a tight situation wondering if you will have enough or not to continue doing business. 


Ready to Add This Insurance Coverage?

Now that you know the ins and outs of business interruption insurance coverage, you can make an informed decision whether you want this type of coverage or not. If you decide it is a perfect fit for you, then you can start shopping around and choose who to be covered by.

Did our blog post come in handy today? Please feel free to browse the rest of our site to catch up with our latest. Visit the Insurance section of the Bootstrap Business Blog right now to learn how to protect your company.

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