Businesses have multiple kinds of coverage inside of their policies, including business interruption insurance. This is meant to help when your business may have to shut down. So, what does business interruption insurance cover? And do COVID-19 closures fall under that umbrella? We delve deep into business interruption insurance and how it can help your business during difficult times.
What is Business Interruption Insurance?
Business interruption insurance is coverage that replaces business income lost due to a direct physical loss or damage such as fire or flood. Basically, it is meant to help a business stay afloat while they remain closed for repairs. Business interruption insurance is not sold as a separate policy but is added to your plan. The amount payable, should you have to file a claim, is based on past financial records for the business. The insurance coverage lasts until the end of the business closure, which is determined by the policy. This can be anywhere from 30 days to a full year.
What does Business Interruption Insurance Cover?
Here are some specific items that may be covered by a business interruption policy:
- Profits: Based on financial records, a policy can provide reimbursement for income that would have come into the business during the time it was closed.
- Temporary location: Should the business continue to operate in some capacity during the interruption, the cost of moving to and operating at a temporary location may be covered.
- Employee wages and training: The policy may cover the cost of paying employees while it is shut down to keep them on the payroll.
- Taxes and loans: Business interruption insurance should cover taxes or loan payments that may be due during the temporary closure.
What is Not Covered?
One of the biggest reasons business interruption insurance has been in the headlines recently is the temporary shutdowns due to COVID-19 restrictions. Unfortunately for most policyholders, a shutdown due to the pandemic is not covered, because viruses don’t actually break anything or cause physical damage. A few other items that may not be covered by a business interruption policy:
- Broken items or damage from an already covered event within your policy
- Undocumented income
If you have questions about business interruption insurance or how to best insure your business, be sure to give us a call.