Imagine driving to your auto body shop in Clintonville, just west of Green Bay. Your hear on the radio that thunderstorms are in the forecast, but you don’t think anything of it. Your mind goes to everyday worries like parts, staffing, and payroll as you pull into your parking spot. Hopefully that skittish A/C unit will work today, you think, crossing your fingers as you emerge from the driver’s side.
What you don’t realize is that, in a matter of hours, your life is about to change. But it has nothing to do with those everyday concerns.
By dinnertime, damaging straight-line winds will have swept through Waupaca County, causing dozens of businesses to close indefinitely, including yours. And you don’t have business interruption insurance.
What is business interruption insurance?
Business interruption insurance is essential coverage that protects you from financial losses when unexpected events disrupt operations.
These events can include natural disasters such as:
- Tornadoes or damaging winds
- Hail damage
- Fires
- Severe cold
Additionally, other unforeseen events can cause business disruptions, like:
- Equipment breakdown (if you have this endorsement to your base policy)
- Acts of vandalism
- Theft
- Burst pipes
- Civil authority (i.e., closure due to a neighboring business sustaining damage)
When a business is forced to close temporarily due to events like these, it can result in huge financial losses. Business interruption insurance steps in to provide support during these challenging times. It covers a wide range of losses during a disruption, including:
- Business income
- Extra expenses (to get you back up and running ASAP)
- Costs of temporarily relocating the business (if necessary)
So let’s say you did have business interruption insurance in place before the summer derecho barreled through. This would’ve helped cover lost income during your closure. It also would have paid for additional expenses like temporary relocation costs and employee wages.
Business interruption insurance is a lifeline for businesses during challenging times. It helps you weather the financial impact and allows you to focus on recovery and getting back on track. Keep in mind, there’s typically a 48 to 72-hour waiting period before this coverage kicks in.
Rural Mutual has no waiting period for extra expenses and offers an endorsement to reduce the waiting period for business income to zero to 24 hours. Reach out to a local agent to learn more.
What is the right coverage amount?
An auto body shop isn’t the same as a sub shop. Every business is different, meaning coverage needs for business interruption are unique. To ensure you have adequate coverage, several factors must be considered.
First, you’ll want to assess your business’s financial needs in the event of a temporary closure. Add up the potential loss of income, including revenue from sales, services, or other sources. You’ll also need to factor ongoing expenses that you’ll need to cover, like rent, utilities, payroll, and loan payments.
Lastly, evaluate the potential duration of an interruption, the time required to recover, and the overall impact on your business’s bottom-line.
Weighing these things will help you determine the right coverage amount to keep your business afloat during an unforeseen interruption. Your insurance agent can help you calculate your coverage needs.
What is the cost of business interruption insurance?
Just like with auto and homeowners insurance, several factors can affect the cost of business interruption insurance. A few common variables are:
- Average income
- Size of your business
- Nature of your business
Businesses in high-risk industries or disaster-prone areas will likely face higher premiums due to an elevated exposure to potential interruptions.
One way to lower the cost of business interruption insurance is to implement risk management strategies. By taking safety measures or installing a backup power source, you can reduce the likelihood and severity of interruptions. Some insurers offer discounts to businesses with proactive risk management practices.
You can’t predict whether severe storms or equipment breakdowns will cause a major interruption, but you can be prepared for it. Connect with an agent today to make sure your business is protected if it’s ever forced to shut down.
