Understanding Insurance Policies

Posted on: 28 October 2022

As a business owner, making sure that you're always able to make ends meet is important. That often means considering what you would do if something were to arise that shuts down your business for any length of time. Even with a standard loss, such as a fire, that keeps your business from operating, you won't necessarily have the means to replace that income for your business, yourself, or your employees. That's where business interruption insurance comes in. Here's a look at some of the things that you need to understand about this coverage.

What Exactly Is Business Interruption Insurance?

Business interruption insurance is a policy that's intended to help your business make up financial deficits when the business is forced to shut down for a covered loss. As many business owners learned during the COVID-19 pandemic, things can be unpredictable at best. If you want to be sure that you're able to meet your company's financial obligations no matter what happens, that's what business interruption insurance is for.

What Does Business Interruption Insurance Cover?

Every business interruption policy is different, but you can find out exactly what your policy covers by reading the declarations page and the policy exclusions. Your commercial insurance agent can help you understand the details as well. 

In most cases, your policy will cover any standard business costs that are part of your existing financial statements or can be clearly documented as legitimate business costs. Your company salaries, accounts payable, and other obligations are typically covered provided that the reason for the interruption is applicable under the policy's terms.

How Much Business Interruption Coverage Do You Need?

When you've decided that business interruption coverage is right for your business, the next thing you need to determine is how much coverage you need. The key in this calculation is to determine how long you would anticipate the business being shut down. Think about the types of interruptions your company might face, including fire, building damage, and similar hazards. Consider the longest period that you could expect your business to be shut down and seek a policy that will extend coverage for at least that term, if not longer for peace of mind.

These are just a few of the things you should know about business interruption insurance before you talk with a commercial insurance agency. Reach out to your local agent today for more details and to get the coverage that you need.