Business interruption insurance, also known as business income insurance, covers the loss of income that a business suffers after a covered loss, (fire, wind storm etc), while its facility is shut down or in the process of being rebuilt. Business interruption insurance premiums are deductible as ordinary business expenses. This type of policy pays out only if the cause of the business income loss is covered in the underlying property/casualty policy. The amount payable is usually based on the past financial records of the business.
When considering business income you also need to determine if you have certain risks that would require specific limits within the overall coverage. If these are not managed correctly, you may suffer a loss and not have enough insurance to ensure your recovery.
Business Income Insurance
1.Peak Season – If your business has seasonal income, you will want to adjust your policy accordingly. Don’t just average your income out over 12 months; that may not be adequate coverage.
2.Period of Recovery – When you consider your recovery time, (the amount of time to fully resume operations) you may need to take into account any special construction needs. For example, you may have unique equipment that will take several months to design and construct. Knowing this will help you design your coverage to meet your needs.
3.Leased Building- If you lease your building and have invested in improvements, you may want to consider this coverage. If the building is destroyed and the owner decides not to rebuild, you may have a serious problem. This endorsement reimburses the tenant for everything lost in the value of the improvements and the cost of finding a new location, agent fees, and increased rent for property that’s already improved.
4.Payroll coverage- Under this coverage, you can select who you want to offer payroll continuation to. However, you must do this prior to the loss. You can also add categories of workers and even managers.