Small business interruption insurance offers essential coverage for businesses as it helps replace lost income if they are temporarily forced to close their doors. This coverage became particularly important for businesses during the COVID-19 pandemic, which forced a nationwide shutdown.
But do businesses still need business interruption insurance in a post-COVID world?
Even as businesses around the country continue to reopen their doors, business interruption insurance plays an important role in helping small businesses maintain financial security. Without this coverage, small businesses are vulnerable to major financial losses if they are forced to temporarily close down.
Here’s what small businesses should know about business interruption insurance, including what it covers and who needs it.
What is Small Business Interruption Insurance?
Small business interruption insurance—also known as business income insurance–helps businesses replace part or all of their lost income; if an event covered by said insurance forces them to temporarily close their doors.
For example, if a fire destroys your storefront and you need to temporarily shut down to repair or rebuild the store, business income insurance can help cover your lost income while these repairs are made.
Business interruption insurance can often be purchased with commercial property insurance and business liability insurance—as part of a Business Owner’s Policy (BOP). Business Owners Policies are designed to offer small businesses the basic coverages they need to protect themselves against the most common risks that commercial businesses face.
What does it cover?
Business interruption insurance can help cover lost income and a variety of operating expenses if a covered loss forces your business to shut down.
These expenses may include:
- Business revenue
- Employee payroll
- Business loan payments
- Mortgage payments
- Temporary relocation expenses
These are some of the most common expenses often covered by business interruption insurance. Other expenses may be covered if they directly result from your business temporarily closing due to a covered loss.
Keep in mind that business interruption insurance only covers lost income during the restoration period. Restoration periods are typically up to 30 days, but can be extended in some cases. Typically, businesses must wait 48 to 72 hours before business interruption insurance begins covering any expenses. Make sure to check your policy to find out how long your restoration period is.
What’s not covered?
While business interruption insurance does cover lost income and a wide range of common operating expenses, it does not usually cover:
- Damaged business property
- Undocumented business income
- Business utilities
Make sure to review your policy to understand what is and is not covered in the event that you are forced to temporarily shut down your business.
How Much Does it Cost?
The cost of small business interruption insurance varies depending on several factors, including:
- Number of employees
- Amount of coverage required
- Claims history
Your location can also impact your business interruption insurance rates. For example, a business located in a coastal city in Florida may face higher rates due to the increased risk of hurricanes and other windstorms. A business located further inland does not face these same risks, and as such, will likely pay lower rates for business income insurance.
Do You Need Business Interruption Insurance in a Post-COVID World?
COVID created an incredibly challenging economic environment for small businesses to operate in. Forced business closures resulted in countless small businesses losing the revenue they needed to stay in business. Even those that had business interruption insurance were forced to shut down as their coverage did not include closures due to communicable diseases. However, others were able to carry on largely due to the financial assistance they received from their business interruption coverage.
But now that things have improved enough for businesses to reopen and operate under relatively normal conditions, do you still need business interruption insurance?
The short answer is yes. While businesses aren’t legally required to carry business interruption insurance, it does provide essential coverage in case your business is forced to close due to covered damages.
Small businesses, in particular, often do not have the capacity to financially support themselves if they temporarily lose their main source of revenue. For these businesses, business income insurance can be the difference between going out of business or not.
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Small business income insurance protects businesses from suffering extreme financial losses if they have to temporarily close down due to a covered event. While it doesn’t cover all damages, business interruption insurance can save your business when the unexpected strikes.
At KSA Insurance, we work with small business owners in South Carolina and across the southeastern United States to help them find affordable small business interruption insurance policies that protect them against the unexpected.
Contact us today to request a quote and learn more about small business interruption insurance in South Carolina.