Activity is what drives business. So what happens when that activity stops?
When your business suffers a loss, insurance is there to help replace the building, the stock, the equipment. But what happens to the income you lose while you are not operating? It takes time to replace and repair everything after a loss. This lost time while you’re not operating; combined with losing the opportunity to serve your customers can have long term effects to your market share that you worked so hard to earn. Did you know that the income lost during this recovery time, can also be insured? This specialized coverage is called “business interruption insurance” and must be specifically purchased on your insurance.
Most insurance policies can have business interruption coverage added. The cost for this coverage can depend on many factors such as; the nature and size of your business, pay-roll, net income, value of business assets and the length of time required to regain normal operating levels. By adding this coverage to your existing commercial policy, you may find the premium isn’t as much as you may expect for this important coverage.
Business interruption coverage will typically be worded similarly on most policies:
“This Rider insures against loss directly resulting from necessary interruption of business caused by destruction or damage by the perils insured against, to building(s), structure(s), machinery, equipment or stock on the described “premises”.”
What does this mean? It means that this is what is sometimes called a follow form coverage and it responds following a direct loss to your premises. So when your insured property is damaged by a peril (cause of loss) that your policy insures against, that loss also triggers a response under business interruption coverage.
This also means, that when the situation that gives rise to the discontinuation of business is not a direct loss to your property on your premises (your building, your contents, your stock) or does not result from a cause of loss that your policy provides coverage against, this “follow form” coverage cannot respond.
There are many variations of this coverage, some insure business income to the point you can resume normal operations, some go further and insure to the point that profit levels reach “pre-loss” levels. Some forms are limited, meaning there is a cap to how much they can pay, others are done on a “loss sustained basis” meaning the policy can pay out whatever the loss is, in a given time period without a pre-set limit. Some forms of business interruption can provide coverage for 12, 24, or 36 months following a loss.
Business interruption is an important piece of your insurance puzzle, and there are many options, it can get complex, at Cornerstone Insurance we’re always happy to get to know you and your business. We want to be your trusted advisors and find the right insurance that fits your business needs.