Maybe you had a hunch from watching the evening news: economic damage due to natural disasters is on the rise. According to AccuWeather, natural disasters experienced from 2000 to 2009 were three times more frequent than they were between 1980 and 1989. Money lost due to natural disasters between 2001 and 2010 was more than $1.2 trillion; from 1981 to 1990 that figure was much lower at $528 billion.
A logical conclusion for business owners is to be properly insured in the event of a natural disaster. Business interruption insurance can mean the difference between permanent closure and recovery.
A typical business insurance policy only covers loss or damage to things, such as equipment, inventory, store or office. Adding business interruption insurance to a business owner’s policy (BOP) protects your earnings if your business is unable to function or experiences a reduction in earnings after a covered loss.
What is covered
With business interruption insurance, if you lose income resulting from the covered event you can usually recoup the losses, not including expenses you would have paid regardless.
The circumstances covered by business interruption insurance include:
- Property damage that results in the inability to operate
- Physical damage to other property, due to a loss that would be covered, that partially or totally prevents access to the business
- A government shut-down in the area due to property damage caused by a covered disastrous event that prevents customers or employees from accessing the premises
- Temporary relocation expenses
- Ongoing expenses such as employee payroll
What isn’t covered
Coverage is limited, not open-ended. Typically, the following are not covered by business interruption insurance:
- Lost net income because of unfavorable business conditions following a loss
- Costs above what is covered, such as a more expensive rental rate if you must relocate or more expensive rebuilding costs than what you’re covered for
- A waiting period of several days before coverage kicks in
A standard business interruption insurance policy won’t cover all damages that could occur with a natural disaster. Speak with with the provider about including extra expense riders you might need.
Learn more about business insurance and compare quotes here. Find out which kinds of policies are right for you.