Depending on what part of the country you live in, you may be concerned with what happens to your business in the event of a natural disaster. The truth is, no matter where your business is, there is always a possibility that a major catastrophe will impact your business or force you to close your doors for a period of time. The good news is there is insurance for that. Business interruption insurance protects you from revenue loss in the event of a disaster.
Business interruption insurance can be purchased as a standalone policy or added to your Business Owner’s Policy (BOP).
When you add business interruption insurance to your business owner’s policy, you have coverage for actual loss sustained. Actual loss sustained is the total of all costs or losses your business experiences from the claim. Frequent losses include:
Making sure you are adequately covered for a business interruption is a tricky task. You may have seen reference to business income worksheets, or business interruption profit forms. These are mainly applicable to larger businesses to calculate possible losses, as well as the amount of time it will take them to get up and running to normal business operations (restoration period).
Small businesses can estimate their coverage need by following these four steps:
One important thing to remember in the event of business interruption is that coverage won’t start immediately. Most policies include a waiting period (similar to a deductible) that delays coverage for 72 hours after an incident.
When a business interruption claim does occur, your insurance company will assign an adjuster. The adjuster will review your financial statements in addition to how the incident has impacted your business to determine the amount reimbursed to you. It is important to keep a detailed record of all financial transactions before an event and after an event to make sure you don’t experience any out-of-pocket costs.