Have you just started a small business, or are you an entrepreneur who’s been in the game for years? 

Whatever your experience level in entrepreneurship, you’ll need a safety net to protect you when something about your business goes south. You don’t have to be located in ‘Tornado Alley’ or in a flood zone for it to be necessary to prepare for unforeseen cessation of your operations; door-closing problems such as city-wide water outages can happen without warning. Business interruption insurance allows you to prepare for problems like these with that safety net.

Business interruption insurance is one of several types of business insurance. Business interruption coverage is a form of income protection for when your business must temporarily shut down. It provides coverage for financial losses you might suffer. 

Aside from income, there are more things that business interruption insurance will include in its coverage. Business interruption insurance covers a halt in the operation of your business when other basic business insurance policies may not be able to. From protecting potential profits to relocation expenses, business interruption insurance can help you with these costs and more. However, some losses or damages do not fall under business interruption insurance coverage. 

For a quick overview, refer to the table below.

Business interruption insurance, also known as business income insurance, compensates you by replacing the income you could have made if the business did not close for a covered loss.  As soon as a covered event occurs, it is important to notify your carriers that a physical loss has occurred due to a covered peril and that your business has to stop or limit normal operations. This will start your waiting period (also referred to as a deductible) and your period of restoration will begin. 

The period of restoration refers to the time your business interruption insurance coverage will take effect. It is usually of a certain duration, covering income losses for a fixed time. Of course, this would depend on your business interruption insurance policy. 

Often, the period of restoration for most policies is 30 days. You can extend this by getting an endorsement. Your restoration period extension can extend by as much as 360 calendar days. The dollar amount covered after making business interruption insurance claims can vary greatly and it all depends on how much revenue your business ordinarily brings in. For this reason, you’ll need to have your financial records in order and on hand when you buy a policy. 

Every business interruption insurance policy will include the following: 

• Financial records

• Documents that state when the business shut down

• A document indicating the reason for the temporary closure

• Possibly others depending on your insurance provider 

These documents are required to prove what your business stands to lose during closure. This holds true for whatever the amount you wish to be covered for is. If you have all of these documents in order, your business interruption insurance claim should be successful.

Once you have filed a claim, expect a waiting period. The usual waiting period is about 48 to 72 hours. 

The short answer to this is yes. During an unexpected closure, you and your employees will be robbed of your source of income. Big or small, every business can experience unforeseen circumstances that may require closing for an indefinite period of time. 

This is why you’ll need a way to ensure that your business is protected if and when your business is forced to shut down. Even if things are going well, it always pays to be prepared. With business interruption insurance, you can receive money for the losses you may incur while your business ‘hibernates’. 

How Much Does Business Interruption Insurance Cost?

There are wide variations in the costs of business interruption insurance. The national average is at just under $1,300 per policy yearly. 

Again, this is the national average, this figure may not be your business interruption insurance premium. Yours may be higher or lower depending on these two main factors – location and size.

The location of your business can say a lot about risks to your insurance provider. The higher the risk associated with your business address, the higher your premium might be. Depending on your location, your insurance provider might only require a $700 annual premium for a fairly safe area. In a flood-prone area, your business interruption insurance premium may be about $1,000 annually. 

It’s simple – the bigger your business, the more coverage you’ll need in the event of closure. The smaller your business is, the less coverage you’ll need. This is why it’s important to speak to a trusted insurance provider to discuss coverage amounts and options, and to anticipate what you will want to have covered and how much value those items hold. 

You, your business, and your employees can feel more comfortable with a bit of protection when things go wrong. For situations that can shut down your operations, a comprehensive business interruption insurance policy can provide that comfort for you. 

Jared Bellmund is an ALLCHOICE Insurance agent in Hendersonville. Reach out to Jared at 828-2327 or visit ALLCHOICEInsurance.com/Hendersonville.