Business Interruption Insurance

Business owners purchase business interruption property insurance coverage in order to offset (usually for up to a year) expenses and income losses from a stoppage of business operation caused by a disaster such as flood, wind storm, fire, theft, or other listed causes or perils.

An example of a business interruption loss might be a restaurant that loses power due to a severe wind storm that damages the building. Because of the loss of electricity, the owner is forced to throw out food that has spoiled and may have to hire special employees to clean and repair the building. The business interruption property insurance will reimburse the restaurant owner for lost income normally received in a usual business day that the owner is not able to obtain while repairing the building and replacing the stock and supplies, as well as reimburse for expenses to repair damages until the restaurant is open and ready for business.

When the Twin Towers imploded in New York City in 2001, any of the businesses in the towers that had business interruption insurance received reimbursements from their carriers for lost income for each day that they were not able to operate after the disaster, as well as reimbursements for expenses until the business was able to regroup staff and data, find and rent space and equipment, and resume operations. The number of carriers who did not specifically exclude damage incurred due to terrorism prior to 2001 but exclude such damage today has increased dramatically.

For some businesses, getting back to pre-interruption status can take weeks; for others, months. Business interruption property insurance usually covers these expenses for up to a year at most. It may also cover additional payroll or the replacement of a key employee, such as a physician, in the event that additional employees are needed to return the business to normal operations.

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