Business income insurance, which is also known as business interruption insurance, is a type of coverage that replaces the income you lose if your company is unable to operate as usual.
What does a business income policy cover?
This type of insurance covers lost income while you are recovering from a covered loss, such as a fire or theft. For example, it might be used to cover mortgage or rent, supplies, payroll, loan payments or tax payments during a restoration period, which is the period when your business is shut down due to physical damages. Covering your lost income until you can reopen again can help you continue to pay your operating expenses.
Business income insurance exclusions
Business income insurance doesn’t cover damages to physical property; it pays for your loss of income when you are repairing or replacing damaged property. That’s a fine distinction, but it’s important. You will need another type of coverage to pay for the damaged property itself.
Additionally, business income insurance may not cover income losses incurred during certain extreme events or “acts of God,” such as pandemics. That might not have concerned you several years ago, but we all know why it should now.
Who needs business income insurance?
Business income insurance is important in a number of circumstances. Almost all businesses (except those that are home based) pay rent or mortgages. If you’re a manufacturer, you likely have rental payments for heavy equipment, such as forklifts. If you’re a retail clothing company, you likely have inventory. If you’re a software company, you may rely on computers, servers and cloud storage. And in all cases, you may have employees who need to be paid.
How does business income insurance work?
To ensure your coverage is comprehensive, most insurers offer a broad range of insurance options and so-called extensions or riders, which are intended for those with unusual circumstances.
How unusual? Say your storefront is the site of a serious crime and authorities shut it down while they investigate. A “civil authority” extension or rider might provide you with lost income during the time you are not allowed to access your business.
You might also be able to obtain a rider that will let you continue operations when employees are unexpectedly absent—not because of run-of-the-mill accidents or illnesses but due to extreme circumstances.
Or if you rely on cloud-based storage to maintain data or transfer important files to vendors, clients and employees, a special type of coverage can reimburse you for income due to an unexpected outage of your cloud service.
You can even get coverage that helps cover lost income and additional expenses that result from an interruption in utility services, including power, communications, and water services.
How can you get business income insurance coverage?
Business income coverage may be included in another type of policy, or you can purchase it on its own. You can also add a variety of optional coverages, as detailed above. But the best way to find the right coverage is to discuss your specific needs with us so you can get coverage tailored to your circumstances. To get started, please call or email us today.