Business Interruption Insurance

Business Interruption Insurance Explained 

When a business is running smoothly, everything seems great. Your customers are happy with what you're giving them, your employees are doing great work, and you are profiting from your passion. It doesn't matter if you're selling products that people love, providing a service that helps out your clients, or doing something that acts as a combination of both; when business is good, life is good. 

Although you can, and almost certainly are, taking reasonable precautions to ensure that everything will run according to plan, there is always the possibility that something out of your control will cause your business to shut down. Every business is vulnerable to potential risks that could force them to shut down temporarily. Luckily, you can protect yourself financially from many risks with business interruption insurance. 

What Is Business Interruption Insurance? 

Business interruption insurance is a form of business insurance that will be able to compensate you for business operations in the event that your business is required to shut down for reasons beyond your control as the result of a claim. This could happen for many reasons, most of which are due to physical damage to the location. If your headquarters, storefront, or possibly another needed building is required to shut temporarily due to an insured event such as a fire, natural disaster, or other unforeseen event, business interruption insurance will help your business make it through this rough stretch and return to its usual role of serving its customers. 

How Does Business Interruption Insurance Protect My Business? 

The way business interruption insurance coverage protects your business will vary greatly depending on your situation, type of business, your specific policy, and the specifics of the claim made. In some situations, business interruption coverage will cover the operating expenses from a temporary location while your current one is repaired or rebuilt. In others, it will ensure that you make the same level of profit that you were expected to make had your operations not been interrupted by covering loss of income and preventing lost income. If you are unsure about what your policy could cover or which options are available to you, it is recommended that you speak with your Morison Insurance broker, who will be happy to assist you. 

Who Needs Business Interruption Insurance? 

Any business owner could use the coverage provided by business interruption insurance. Even a small, independent business run out of a single-desk office by a solo entrepreneur could easily be unable to operate normally due to damage to the business premises. 

It's possible that a fire that started on a neighbour's property outside of work hours could spread to the business location, rendering it temporarily unusable. Although the business owner is not at fault, this would be a large inconvenience, and they would be required to cover many of the costs associated with their business being closed. This can help prevent financial losses if something happens. 

If you require assistance with your business interruption insurance policy, or would like a business interruption insurance quote, please speak with your Morison Insurance broker. 

Is Business Interruption Insurance Mandatory? 

Like most commercial insurance, business interruption insurance is not mandatory. It is also not a stand-alone product, as it remains an optional part of business insurance policy. However, it is a coverage that is highly recommended for any business owner. This is because needing to close your doors while continuing to pay ongoing business expenses for any length of time can be absolutely devastating for any company, especially a small business that doesn't have as many financial resources. Business interruption insurance can help in significantly softening this blow, as it can provide financial compensation if the unthinkable were to happen.  

What Does Business Interruption Insurance Cover? 

Business interruption insurance covers the costs of some on going expenses and lost income if they must close their doors to their business due to physical harm to the business location, civil unrest, a natural catastrophe, or other insured reasons out of the control of anyone involved in the business. Depending on your insurance policy, this could include covering rental or lease costs of the building you operate out of, relocation costs, extra security measures, duplicate bills such as utilities, paying staff who are unable to work, and other ongoing costs that a business owner would likely need to pay regardless of the condition of the building after a claim. If you would like to know more details or would like a business interruption insurance quote, it is recommended that you speak with your Morison Insurance broker. 

How Much Business Interruption Insurance Does My Company Need? 

The amount of business interruption insurance coverage that any company needs will depend on several factors that are related to the business operations. These factors include the following: 

• The size of the company. 
• Ongoing costs the company pays, such as rent, maintenance, energy, security and so forth. 
• The number of staff and their salaries. 
• Profit the company is expected to make. 
• The location of the building and nearby risks. 
• Any risks specific to the industry that may result in a shutdown. 

Please note that these are not the only factors involved in determining the level of business interruption insurance that you may want to provide for your company. If you have any questions about which amount is right for you, your Morison Insurance broker would be happy to answer them. 

What Types Of Business Interruption Insurance Exist? 

Since business interruption insurance is a type of insurance coverage that covers a wide variety of possible losses, it can offer multiple different types of protection. Many of the most common types of coverage are business income coverage, civil authority coverage, contingent business interruption insurance and extra expense coverage. 

Business Income Coverage 

As the name suggests, business income coverage, will cover income lost during the time a business is unfortunate enough to close as the result of an insured peril. This coverage will ensure that your company will not be hit by temporarily having to close its doors to its customers and clients. This type of coverage will cover costs for the amount of time specified on the policy, known as the indemnity period. 

Civil Authority Coverage 

Damage to your building is not the only thing that could potentially cause your business to be temporarily out of commission. Sometimes it’s due to a wide variety of potential government shutdowns, such as the aftermath of a natural disaster. If, for instance, the government prevents you, your employees, and your potential customers from reaching your location after a flood in the area. Even if your building is unharmed and would normally still be open for business, if it's part of a block that's under denied access, you still won't be able to run your business. In this case, civil authority coverage would cover the costs associated with your business, as well as providing income, up to the duration of the indemnity period. 

Contingent Business Interruption Insurance   

Sometimes, the reason your company is unable to remain open isn't due to a local problem. We live in a highly interconnected world, where it seems like every business is dependent on a series of other businesses. This can have a drastic impact on a lot of stores, as they might depend on suppliers for their merchandise. If, for some reason, your supplier is shut down due to an insured risk, which in turn causes your business to shut down due to a lack of product, contingent business interruption insurance will be able to provide you with enough of a safety net that you will be able to breathe easily.   

Extra Expense Coverage 

Sometimes, even though a company can't operate in its normal location, it's able to find a temporary place to operate as a stopgap while its regular location is being repaired. Being able to continue your business will likely have you breathing a sigh of relief as a business owner. However, you might be concerned about needing to pay for things such as rent for your new location. 

Luckily, with extra expense insurance, this is not the case. If your building is damaged in an event, making it no longer a suitable place to do business, you might have to worry about the cost of moving and setting up and paying additional expenses to rent out a new location. Extra expense insurance can pay for costs like this, allowing you to continue operating out of a temporary location as you look forward to returning to your standard place of business. 

What Does Business Interruption Insurance Not Cover? 

Sadly, business interruption insurance doesn't cover everything. Firstly, if your property is damaged, it will not cover the cost of repairs or replacement of the property damage itself. Business interruption policies will only cover the costs of running your business normally. Coverage for the damaged property would fall under commercial property insurance. Liability claims may and legal costs of covered lawsuits would be covered by commercial general liability insurance or errors and omissions insurance.  

Does Business Interruption Insurance Cover A Pandemic Similar To Covid-19? 

Anyone who lived through the chaotic events of 2020 remembers that plenty of businesses were shut down temporarily. This might seem like the exact situation business interruption insurance is designed to protect against, and this may have even been the first thing that came to mind for a lot of people. However, despite the business interruptions of the government closures, this is not the case. In a 2023 case, the Supreme Court of Justice ruled that standard business interruption coverage would not cover businesses that shut down due to COVID-19, as the virus did not cause a physical loss to damage or property.  

Can Business Interruption Insurance Cover Non-Profits? 

Yes. You can include business interruption coverage as part of your non-profit insurance policy. This will allow you to continue contributing to the cause that you believe in by carrying on operations, even if your particular organization is unable to operate for a brief time due to a claim.  

How Long Does Business Interruption Insurance Last? 

There are two possible ways in which this question can be answered. One way to look at this question is to ask how long business interruption insurance will reimburse an insured for when the insured is not currently working out of their primary business location. This is also usually one year, although once again, it changes based on the specific points within your policy.  

The other is to answer how long the contract is before you must renew. In this case, it will last as long as your business insurance policy that it is part of, which usually is one year, but it might change based on the details of your particular policy. When it is time for you to renew your business insurance, your business interruption insurance will be renewed alongside it. 

If you have questions as to how long your policy will cover you or if you would like to know more about the estimated time a policy could last, we recommend that you speak with your Morison Insurance broker. 

How Much Does Business Interruption Insurance Cost? 

There is no set amount that every businesses’ business interruption insurance premium quote will be. This is because every business is different, as they are each exposed to varying perils and levels of risk.  Also, there are various forms and options of business interruption coverage, and some have different approaches to weighing the various risk factors. Some of the factors involved in determining your business interruption insurance quote are: 

• The size of your business. 
• The industry your business is in, and the risks associated with it. 
• Your business' location. 
• Your claims history of the policy holder. 
• The number of employees you have. 
• The level of coverage desired. 
• Your experience in your field. 

Please note that these are not the only factors involved in giving you your business interruption insurance quote.  

Can I Lower My Business Interruption Insurance Quote? 

Yes. There are plenty of ways you can reduce your business interruption insurance quote. Some of them are listed below: 

• Avoid making claims on small losses on your business insurance plan to keep a clean claims record. 
• Keep a good credit score. 
• Ensure that you are taking precautions so as not to get shut down. This includes following workplace safety guidelines. 

Please note that this is not the only way to keep your business interruption insurance quote low. To learn more, speak with your Morison Insurance broker. 

Where Can I Get A Business Interruption Insurance Quote? 

You can get a business interruption insurance quote from Morison Insurance. Morison Insurance is a brokerage with over 100 years of history, helping our clients get the insurance coverage they deserve. Whether you need help with business interruption insurance, any other form of business insurance, or even personal insurance, we can get you options for what you desire. You can call us at 1-800-463-8074 or fill out the form on this page to help set up getting the insurance you deserve. You'll be glad you did. 

This content is written by our Morison Insurance team. It is provided for general information only. Insurance needs differ from person to person, and this article is therefore not a substitute for professional advice about your individual insurance needs which can be obtained by speaking to one of our brokers.