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Business interruption insurance can help you bounce back after disaster

Stephanie Taylor Christensen

Loss of business caused by a natural disaster can be devastating. However, having the proper business insurance coverage can lessen the effect and get your business back on the road to recovery.

Natural disasters are more than inconvenient to businesses — they’re expensive. Fortunately, collapsed roofs and structural damages are generally part of the standard coverage in a business owner’s policy. In addition, if your business is affected by a power outage, you may be able to use property insurance to recoup losses, according to the Insurance Information Institute.

However, business insurance generally pays only for damage repairs. What about the income you lose if your business is forced to shut down temporarily?

Business interruption insurance compensates a business owner for lost income, operating expenses and temporary relocation after a natural disaster. It’s generally bought as a package with property insurance, according to a disaster insurance guide on the website for Santa Clara County, Calif. Because 100 percent coverage for business interruption is extremely costly, a typical 80/20 scenario provides lower premiums. In this scenario, the insurer pays 80 percent of the loss, and the business owner is responsible for the remaining 20 percent.

As a general rule, in order for business interruption coverage to be effective, there must be actual damage to or loss of your physical business property. The nature and extent of damage necessary for coverage to kick in varies by policy and insurer, according to the Pennsylvania Bar Insurance Institute.

To make business interruption claims, it is critical to provide supporting documentation of the loss. Keep business documents secured off-site in a place you can quickly access. Financial records are necessary to verify the value of all insurance claims you make. Business interruption insurance can provide continued paychecks to retain salaried employees while the business is shut down, according to Santa Clara County.

For small businesses with fewer than 100 employees, carrying a business owner’s policy BOP) is an affordable way to obtain broad coverage, provided that your business is eligible not all are). Premiums for BOP policies are based on factors like financial stability, location, and potential risks and hazards associated with your business, according to the Insurance Information Institute. BOPs puts much of the basic coverage needed by a typical small business into a standard package that costs less than buying property, liability and other policies individually. BOPs usually include business interruption coverage.

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