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 you suffer a business interruption, such as a property insurance claim forcing 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.

Business Interruption Insurance

This coverage pairs with your business property insurance or business owners’ policy to provide a lifeline when a claim affects your revenues. Your coverage can replace the revenue you will need to protect your business’s 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 in the local market. Your business’s location is on a busy road, so visibility is excellent and in high demand. There is every reason to be optimistic about your business’s 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 for the repairs and damage to the showroom.

However, you might close your doors for a while — significantly since the car crash damaged a wall 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. You can complete basic repairs 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; this can even affect your neighbouring businesses.

Plan for the Unexpected

When you began your business, you wrote up a business plan. You detailed your plan’s business goals, expected revenues, expenses, and other factors. If you were thorough, you also detailed the challenges your business will face and overcome these challenges. Business interruption insurance’s purpose is to cover the risks that are impossible to predict — the kind that your business plan did not address 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 you can better protect your business against the chaos that life sometimes sends our way.

Reach out to your advisor to learn more.

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