Business Interruption Insurance

Business Interruption Insurance (BII) is an often-overlooked insurance coverage. If your business is forced to close due to a fire or natural disaster, your risk is not limited to just a temporary loss of income. You also run the risk of losing customers who turn elsewhere for their product or service needs. You may have difficulty paying key suppliers during an income interruption and as a result those suppliers may sever their business relationship with your company.  Business Interruption Insurance is designed to protect businesses from the types of risks associated with an interruption in your business operations.

BII is usually part of packaged commercial insurance policies but can be purchased in conjunction with business property insurance since the perils, or causes of loss, are usually the same for property insurance as for Business Interruption Insurance.  A variation in BII designed for those enterprises that depend heavily on outside suppliers is called Contingent Business Interruption Insurance. Loss in business income due to the inability of a supplier to provide goods or services necessary to run your business can be insured against in many circumstances.

How much BII your business needs will depend on several factors, such as how easily you could continue operations at a temporary location and how long your business might be sidelined based on each potential peril/cause of loss. You will also want to consider what income is being insured. It could be average daily, weekly or monthly income, as well as income for the most recent accounting period, peak income, or some hybrid.

BII usually requires a 48-hour waiting period before “kicking in” and indemnity will be based on the financial records of your business. It goes without saying that you will need to keep your records up to date and in a safe place.