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What is Business Interruption Insurance?

Businesses are not required to have insurance in the state of Texas. However, that doesn’t mean that business owners should operate without any safeguard. Business owners can purchase various types of insurance, such as flooding insurance and professional liability insurance, but what about business interruption insurance?

What is Business Interruption Insurance?: The Basics

Business interruption insurance is a policy that business owners can obtain that helps pay for extra expenses or replace lost income during an unexpected interruption of the business. Examples of when businesses may have to use business interruption insurance include if the business is damaged because of a natural disaster (like a wind storm or lightning strike) if a fire forces the business to shut down, or something falls onto the building. When a business owner has building insurance, they can rest assured that expenses can be covered thanks to this type of insurance.

One of the main reasons to have business interruption insurance is so employees can continue to be paid and money is available to cover other expenses. If your business has to unexpectedly shut down, you wouldn’t want your employees feeling like they have to find other employment until your business reopens; or, your business is closed for so long, that your employees find other employment, and when you reopen, your employees aren’t coming back to work for you. It is critical to continue paying employees that way when the business is able to reopen, you have employees to help run the business.

The second reason to have business interruption insurance is so you have the funds available for payments while your business is closed. Utility bills and other expenses won’t stop just because your business isn’t open. By having building interruption insurance, you’ll receive the income you need to keep your business afloat even if your doors aren’t open. This extra income can help with other costs too such as if you decide to relocate your business, taxes, or training costs so employees can feel confident working with new equipment.

How Quickly Does Business Interruption Insurance Go Into Effect?

Business interruption insurance can go into effect as little as 48 hours once it’s activated. The average time for the policy to kick in is between 48 to 72 hours. It’s important for a business owner to check the policy to see how long the insurance will last as there is usually a specific time period of when the policy can be in place. This is known as the restoration period. Most policies will last up to 12 months and once the insurance is activated, it can not be extended by the business owner. That means that if an owner’s business is still not up-and-running after a year that the policy would expire and the business owner would not receive any additional payments.

What Does Business Interruption Insurance Cover?

Most insurance companies will have a coverage limit or a maximum amount the insurance company will payout, for business interruption insurance. It’s important for business owners to fictionalize a worst-case scenario option when it comes to picking out the proper coverage so they don’t have to decide on the spot in a worst outcome real scenario.

Considerations business owners should make include:

  • How long would it take to get the business back on track after a loss?
  • If you do not own the building where your business is located, how sturdy or protected is the building?
  • If another government shutdown happens, what will it cost to keep your business functioning and employees paid?

Have Questions Regarding Business Interruption Insurance?

Business owners who purchase business interruption insurance are trying to look out not only for their company but employees as well. However, if you have business interruption insurance and are getting the runaround with the insurance company, that’s when you need to contact Hawash Cicack & Gaston, LLP. We take on the tough insurance companies to fight corporate wrongdoing. Don’t give up when the insurance company tells you “no” — reach out to our team of attorneys today by filling out our online contact form or by calling (713) 589-7249.