Losses Covered by Business Interruption Insurance
The following are typically covered under Business Interruption Insurance:
- Profits that would have been earned, and
- Operating expenses and other costs still being incurred, and
- Temporary Location Extra Expense, and
- Extra Expenses, and
- Rental Expense, and
- Civil Authority / Government mandated closure of business lost revenue.
1. Profits that would have been earned — typically reimburses the insured for the amount of gross earnings less the normal expenses that the insured would have earned, but for the interruption of the insured’s business. This coverage normally has a seventy-two hour waiting period, and will last a year or, in some cases longer depending on the type of policy you have.
2. Operating expenses and other costs still being incurred — this might include the salaries of key and/or skilled employees who the insured doesn’t want to lose. Unemployment insurance is inadequate for most employee’s needs. The penalties for your workers going on unemployment insurance can be substantial in increased payments. Your workers will be ready to go when you are, which will be less disruptive. This coverage normally has a seventy-two hour waiting period, and will last a year.
3. Temporary Location Extra Expense – the insured might find that it is best for his business to open as quickly as possible in a temporary location. The rent for that temporary location would be extra expense. This coverage normally has no waiting period, and will last a year.
4. Extra Expenses – this could include any extra expenses incurred due to the covered loss, including expenses that are incurred to minimalize the loss of profits. This coverage normally has no waiting period, and will last a year.
5. Civil Authority / Government mandated closure of business lost revenue. It is not uncommon for civil authorities to shutdown access to a business for safety reasons after a covered loss to the insured. This coverage normally has a twenty-four hour waiting period. The coverage has a thirty-day maximum on most policies.
The time to consider Business Interruption Insurance is when you purchase your insurance, not after a loss.
Also see: Business Interruption Insurance - Don't Be Caught Short!
Business Interruption Insurance Review
Understanding Coinsurance as It Applies to Business Interruption Insurance
Calculating Your Needed Coverage Amount for Business Interruption Insurance