How Much Does Business Interruption Insurance Cost?

If you run your own business, and something happens that grinds business to a halt, how will you continue to pay your bills?

Business interruption insurance is a type of insurance that is designed to fill the gap when you cannot perform your services for a period of time.

In this post, we will explain more about how business insurance works, and go over what it costs.

Who Needs Business Interruption Insurance?

You need business interruption insurance if you are:

• A business owner
• An entrepreneur
• Self-employed

Maybe you refer to yourself some other way. The bottom line is if you are in business for yourself, and you do not have an employer, then you need business interruption insurance.

Business Interruption Insurance Coverage 101

Business interruption insurance is important for business owners because unlike an employee, you do not have any paid time off or unemployment insurance or so forth to fall back on when you have time out of work. Not only that, but you can incur additional expenses that an employee would never need to deal with.

Example 1

Imagine that due to an earthquake, your place of business takes heavy damage. You need to repair the building before you can continue using it.

In the meantime, there will be some days you cannot work at all. You also will need to pay for a temporary office while you await the repairs.

With business interruption insurance, you can cover the lost profits during this timeframe, as well as the cost of the temporary office.

Not only does this maintain a steady flow of income, but it may in some cases prevent you from going out of business.

Example 2

Picture that you run a dispensary, and mainly stock products from a few local growers. Now let’s say that harsh weather has ended up destroying the crops of these growers. You find yourself unable to supply any of your usual products.

Suddenly, you are unable to operate, because your shelves are emptying out. This is a time when you could cover your losses with business interruption insurance. You can then work on resolving the supply issue.

It is important to be aware that coverage will not last indefinitely. A policy with a higher maximum cap can be helpful at times like this.

What Does Biz Interruption Insurance Cover?

Business interruption insurance can cover profits that are lost during an interruption in your business, operating expenses, payroll, taxes that come due, dependent properties, and loan payments.

Keep in mind that for you to be eligible to use your business interruption insurance coverage, your business must be interrupted due to a cause that is covered by the policy. Not all interruptions will qualify for compensation through your insurance.

Here are some different types of interruption of business insurance:

• Business income coverage: This type of policy covers payroll, utilities and rent during a time that your business cannot operate.

• Civil authority coverage: If the government demands that your business close down because of a lockdown, curfew or evacuation, this type of policy will cover you. In times of increasing political and societal instability, this is an important type of coverage to get.

• Contingent business interruption: Sometimes you may not be able to operate your business because another business on which you depend is not able to function. For example, you may depend on a supplier that has to shut down. That is where contingent business interruption policies come into play.

• Extra expense coverage: Sometimes the situation that causes the interruption in your business carries other associated expenses. Some common examples include temporary workers or needing to rent a space in which to work while repairs are made on your usual workplace. When that happens, you can rely on extra expense coverage to help you pay for these expenses.

What Does Business Interruption Insurance Cost Annually?

The average cost of business interruption insurance is $1,200 per year.

What makes the costs of some policies higher than that amount, and others lower? Here are some factors that can impact the cost of business interruption insurance:

• The types of coverage you choose: The more types of coverage you choose to buy, the more expensive your insurance will be. For example, tacking on something like extra expense coverage on top of a regular business interruption policy would increase your costs. But it may be worth it depending on your risks and needs.

• How large or small your business is: Insuring a larger business that has higher operating expenses and payroll will cost more than insuring a smaller business.

• What type of business you operate: The type of business you run has an impact on your risk levels, so underwriting needs to take that under consideration.

• Your deductible: A higher deductible can qualify you for a lower monthly premium, but it means paying more out of pocket if you need to file a claim.

• Your maximum: The higher your maximum coverage cap, the more expensive the policy will be.

• Your geography: Some areas are riskier to do business in than others, so your geography will also affect how much your policy costs.

Get A Free Quote On Business Interruption Insurance

If you are ready to get the insurance you need to stay financially stable during business interruptions, click any of the links below to request personalized quotes from our recommended carriers.