Understanding Business Interruption Insurance for Your BOP
Many small businesses lean toward a business owners policy (BOP) to protect their business’ assets. These insurance packages combine general liability, commercial property insurance and other insurance coverages into an affordable policy. Many of these policies also include business interruption protection.
Not all policies will automatically come with this coverage, however, so it is important to ask your insurance agent about adding it to your policy.
What Is Interruption Insurance?
Say that one day a severe storm damages your restaurant. It might break out windows, put holes in the roof and cause structural damage. When the storm passes, you are going to need to take time to repair the business. In many cases, you will not be able to operate while making these repairs, as you can’t invite employees or guests in when it’s unsafe.
Your BOP likely has property coverage. That will help you pay for the repairs to your business following a loss. However, property coverage alone won’t cover the money you lose simply through lack of operations. After all, you’ll need time to repair the business, and time equals money. Therefore, you stand to lose out financially during this closure. If you don’t have appropriate insurance protection for this risk, you might even sustain irreparable losses.
With business interruption coverage, you’ll protect your business in cases like these. If a covered event causes a temporary closure in the business, you won’t lose out financially in the meantime. This coverage will help supplement your costs and expenses incurred during the closure. It might help you pay for:
The expenses of temporarily relocating the business
Back expenses, such as employee salaries or vendor fees
An estimated profit that you might have earned had you been able to operate
In any case, you’ll get a financial cushion during a time of significant loss potential. When you can’t operate, you should not have to worry where the money will go in the meantime. Instead, let business interruption coverage serve as a cushion to put your mind at ease.
The good news is most BOPs will automatically include interruption coverage. Nevertheless, it doesn’t hurt to ask your agent to explain to you the details of your policy options. Most policies won’t cover every interruption expense. They will also have limits on what you can receive in compensation. Make sure your BOP has business interruption insurance in case you ever need it.
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