Understanding Business Interruption Insurance

If you own or run a business, you already know how important it is to have property insurance, especially liability insurance. But what do you do if a property insurance claim forces your business to close temporarily? Revenue drops to zero. Often, payroll still has to be paid. Your rent or commercial mortgage is still due on the 1st. Utility bills and loan statements keep rolling in. Seasonal slowdowns are one thing, but when your revenue drops to zero unexpectedly, everything you have worked to build may be at risk.

Fortunately, you can purchase business interruption insurance. This coverage pairs with your business property insurance or business owners’ policy to provide a lifeline when revenues are affected by a claim. Your coverage can replace the revenue you will need to protect your business future.

Here is a real-life example. Let’s say you own a retail business. Business is growing, and you are carving out a niche for yourself in the local market. You are located on a busy road. Visibility is great. Demand is high. There is every reason to be optimistic about your business future.

One day, a car veers off the road and crashes through the front of your store, breaking the window, door, showcases, and even damaging a wall. Fortunately, nobody is seriously hurt. And thank goodness you have property insurance. The repairs and damage to the showroom are covered.

However, you might be closed for a while — especially since a wall was damaged as well. In this real-life example, the wall was a load-bearing wall—engineers from the township schedule a seemingly endless array of meetings, surveys, and inspections. Basic repairs can be completed in days, but, in this case, the process could take weeks — or even months. You are out of business until the township says the building is safe. Even your neighbouring businesses are affected.

When you started your business, you wrote up a business plan. In your plan, you detailed your business goals, expected revenues, expenses, and other factors. If you were thorough, you also detailed the challenges your business will face and how to overcome these challenges. Business interruption insurance is designed to cover the risks that are impossible to predict — the kind that was not addressed in your business plan but that happens to real businesses every day.

If you already have business property insurance or are thinking of starting a business, reach out to your agent or broker to learn more about business interruption insurance. Coverage may be more affordable than you think, and your business will be better protected against the chaos that life sometimes sends our way.

Reach out to your advisor to learn more.



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