Business Interruption Insurance - Don't Be Caught Short!
Businesses don’t usually go broke because they don’t have adequate insurance on their building. Their biggest risk for being underinsured on the building is a coinsurance penalty on a partial loss. However, Mortgagees and other lender/loss payees usually make sure that building and contents fire policies carry enough insurance to cover debts.
Rather, it is more typical that businesses who have a catastrophic loss will go out of business if they don’t have adequate Business Interruption Insurance.
Business Interruption Insurance replaces business income lost as a result of an insured loss that interferes with, or stops, the operations of the business. The loss must have been caused by a covered peril, such as fire or a windstorm. This kind of coverage is not sold as a stand-alone policy, but can be added onto the business’ property insurance policy or comprehensive package policy. Since Business Interruption Insurance is included as part of the business’ primary policy, it normally only pays out if the cause of the loss is covered by the primary policy. Because coverage is limited to perils insured on your real property coverage part, you need to pay special attention to business interruption needs from flood or earthquake, which probably are not included.
Business Interruption Insurance is also known as Time Element Insurance. It provides vital protection when circumstances are beyond the control of the business owner.
Policies that include Business Interruption Insurance place a further degree of care on the insurance company to get the insured back in business as quickly as possible as a matter of preserving corporate insurance company assets.
Three Kinds of Business Interruption Insurance:
There are three kinds of Business Interruption Insurance normally involved in loss:
- Basic Business Interruption Insurance compensates the insured for the income lost or extra expense incurred during the time needed (and insured) to repair or replace the damage to the covered property.
- Extended Business Interruption Insurance provides coverage (sometimes limited by a period of time) for the income lost after the property is repaired or replaced, but before the income returns to its pre-loss level.
- Contingent Business Interruption Insurance provides coverage for the insured’s loss of income or extra expense incurred resulting from physical damage, not to its property, but to the property of providers, suppliers, or consumers of its product or services.
Also see: Losses Covered By Business Interruption Insurance
Business Interruption Insurance Review
Understanding Coinsurance as It Applies to Business Interruption Insurance