For small to medium-sized companies, it is important to have a continual flow of revenue. A single interruption in cash flow or revenue generation can be costly and may lead to reputational damages or even closures. Business interruption (BI) insurance from a commercial insurance agency in Salt Lake City can provide a safety net against interruptions in business, including equipment damage, vandalism, man-made, or natural disasters.

Business interruption insurance is different from property insurance in that property insurance only covers the physical damage to the business. Additional coverage provided by business interruption policies covers the profits you would have earned had the interruption not happened. This extra policy provision can be used for all types of businesses. It is an insurance policy designed to keep a business in the same financial position it would have been had no loss occurred.

A business can add this type of coverage onto the business’ property insurance policy or have it written into a comprehensive package policy such as a business owner’s policy or BOP. Business interruption insurance can also be a standalone policy if desired. All you need to do is contact your commercial insurance agency in Salt Lake City. Do note that this type of insurance is intended to cover only your losses.

Under a BI policy, items that are typically covered include:

  • Fixed costs or operating expenses and other ongoing costs or the revenue your business would have earned if things would have been normal.
  • Commissions & training costs. A business interruption policy covers the cost of providing training to operators of machinery that need to be replaced after a disaster.
  • Employee wages. When a disaster strikes, you are often unable to operate and make payroll. With Business interruption insurance, you can avoid losing staff while your business is closed by ensuring that you can pay your employees.
  • Profits that would have been earned is covered. Profit reimbursement is based on prior months’ financial statements.
  • Temporary Location. Some BI policies cover the expenses for moving to another location for a short time.
  • Rent or lease payments. If you cannot use your business or premises following a disaster, you will still be required to make lease payments. BI insurance allows you to continue making these lease payments even if your business is not operating.
  • Relocation expenses. Most BI policies define the coverage starting on the date of the covered disaster until the destroyed property is repaired and can return to the same operational conditions that existed before the disaster.
  • Government-mandated closure of the business.  Business forced to close because of government-issued curfews or street closure related to an event are also covered.
  • Loan payments. Outstanding loans need to be paid no matter if you have a disaster and a closure or not. Business interruption insurance will help you make those payments until you are fully operational.
  • Extra Expenses. Compensation for reasonable expenses will help your business continue operation while your business is under repair.

Scenarios

To illustrate what business interruption insurance can do for you, take the case of a small family-owned bagel shop.

The shop experienced a fire that caused major property damage and the loss of crucial baking equipment.

Repairs for the property damage and the equipment replace were expected to take at least three months. During this time, a great deal of lost time and revenue would be experienced by the shop.

Fortunately, the owners had the foresight to enlist a business interruption insurance policy from a commercial insurance agency in Salt Lake City. Because of this policy, after the fire, the business was able to stay afloat and recover quickly. Business interruption insurance was able to reimburse the income the bagel shop would have received had they been able to operate as normal.

If the bagel shop had not purchased and utilized this policy, their business would have been bankrupted. They had the right policy and were able to take the necessary steps to get everything repaired and replaced without sacrificing a day to day income.

In another scenario, a mid-sized auto dealership lost the majority of its inventory after a flood. The lot was flooded, and the building was damaged. The flood meant the dealership had to relocate, incur steep moving expenses and sign a new lease.

Because of the flood, the car dealership was focused on moving to remain in businesses. Without the proper business interruption policy they received from a commercial insurance agency in Salt Lake City, the costs would have to be paid for out of pocket. Most companies cannot sustain these types of costs, and the dealership would have had to close for good. BI insurance was able to reimburse the car dealership for all of the costs associated with a move.

Business interruption insurance is available to keep your business afloat while you are cleaning up after a disaster rebuilding or have been evacuated. Insurance is a barrier to financial loss. Insurance is defined as a form of risk management, and insurance is used to protect a business against the risk of uncertain loss.  To determine the best type of insurance, and particularly business interruption insurance, contact Risk Managers LLC, a commercial insurance agency in Salt Lake City, Utah.