Business interruption coverage can be added to most business property insurance policies to protect your business from losing income in the event of a disaster.
If employees need to vacate the physical office space for any period of time due to a covered peril (such as a fire or storm), your business interruption coverage will compensate for the financial losses incurred.
While business property insurance will cover any necessary restorations to your physical property in the event of a disaster, only business interruption insurance can cover revenue lost by your company due to inability to operate. This type of insurance can also cover ongoing operating expenses (such as payroll and utility bills) while your doors are closed.
Alternatively, some policies include “extra expense” insurance, a feature that allows your business to offset extra operating costs if you wish to stay open during a restoration period. For example, if you run a real estate agency, your extra expense policy would cover the cost to rent a temporary office space for the realtors to work out of while your building/office is being restored.
The amount of business interruption coverage you invest in should be determined based on the nature of your business activity, the level of disaster-risk the company faces on a day-to-day basis, and how easily you could temporarily relocate.
Based on these factors, calculate the amount that seems substantial enough to keep your business afloat for at least one week (if not much longer) in the event of a disaster. Keep in mind that it can take quite a while to get your company back up and running after a fire, flood, or other major disaster.
If you’re already investing in business property insurance, it’s definitely worth looking into adding business interruption coverage to your policy.
That said, we encourage you to do some more research on extra expense coverage and other optional features to determine exactly what your business requires before making the investment. After all, every business has its own unique needs and budgetary constraints.