Through our Business Owners Insurance Policy, Embroker helps you get business interruption insurance to protect your company if it is forced to close down for a period of time as a result of an event that made your business property unstable.
Business Owner’s Insurance
Tell us a little about your business and we’ll create a coverage package that fits your needs, with a price you can count on.
Get a Quote
Business interruption insurance helps replace the lost income and other expenses if a business is forced to temporarily shut down due to a covered peril that affects its commercial property. Covered perils typically include natural disasters such as fire, wind, or lightning, as well as theft and falling objects.
Business interruption insurance (also called business income coverage) is typically bundled together with general liability and property insurance into a Business Owners Policy, also known as BOP insurance. However, it can also be purchased under a more comprehensive, dedicated property insurance policy.
Extra expenses coverage is often confused with business interruption insurance because it is often purchased along with business interruption insurance. However, the two policies cover different types of things.
The name basically gives a pretty good indication of what extra expenses insurance covers, taking care of some of the “extraordinary” expenses that would be associated with a situation in which business interruption insurance would be needed.
Deciding to move your business to another location and reopening while you wait for your regular location to be repaired is one of the most common examples in which an extra expenses policy would help. An extra expense policy would cover the costs of moving to a temporary site, including renting new property and equipment, paying employees overtime to help realize the move, and hiring new employees to work at the temporary location.
If you run a type of business that can be relocated easily, extra expenses insurance can help you to continue making money at a temporary location while you are waiting for your permanent location to reopen.
Another type of business interruption and extra expenses insurance that exists is called contingent insurance. This type of insurance protects you in the case that one of your key partners is forced to close down operations.
For example, imagine you are running a chicken wings restaurant and the factory of the company that supplies all of your hot sauce burns down. Contingent business interruption and extra expenses insurance could help keep you afloat financially until your partner’s factory is back and running.
This type of policy provides you with financial support in the event that you lose a manufacturer, supplier, or even a client that your business’s bottom line relies upon heavily.
Contingent business interruption insurance would pay for lost profits and wages until their property is restored. Contingency extra expenses insurance would pay expenses that would enable you to continue your operations with another partner until your old one is ready to return to action.
When insurers write contingent policies, the property of your valued partner needs to be listed as a dependent property. Obviously, the dependent property listed in the policy needs to be owned by a third party that is vital to the work of your company.
There are four entity types that qualify as eligible dependent properties:
All businesses should invest in business interruption insurance, but some need it more than others.
This coverage is crucial for any company that relies on its physical locations and assets (equipment, machinery, or buildings) to conduct its operations. This includes businesses such as brick and mortar retail stores, restaurants, or cosmetic salons that need their physical locations to generate revenue.
Additionally, businesses based in locations that have been historically exposed to extreme weather patterns or natural perils should look to secure their peace of mind with the right business interruption coverage, regardless of industry.
Do you need business interruption coverage? You can get your risk-free business interruption insurance quote with Embroker in just a few minutes.
The potential costs of having to shut down your operations for an extended period of time could be staggering. Paying employees who can’t work, lost profits, damaged reputation, and the cost to relocate or open temporary locations may seriously endanger even the most financially stable businesses.
Without comprehensive coverage in place, many businesses that rely on their physical property and assets would be forced to permanently close their doors in cases of fires, floods, or other covered perils.
Business interruption coverage is very closely tied to your commercial property insurance. This means the perils covered by your property insurance policy will also be covered by your business interruption policy.
Let’s take a look at what costs you can expect your business interruption policy to respond to:
Business interruption insurance will reimburse your business for lost revenue during the temporary shutdown. Typically, the policy will reimburse companies for up to a year. This is a crucial aspect of the coverage, as it allows businesses to stay afloat during temporary setbacks that otherwise could force them to permanently close their doors.
Even though they are forced to shut down temporarily, most businesses will want to maintain their workforce during difficult times. Business interruption insurance will respond and cover your payroll while your business isn’t generating revenue. Typically, you can expect to be covered for up to a year.
Just because your business is temporarily closed, it doesn’t mean you can ignore your landlord and not pay them. Business interruption insurance will cover your rent or your lease while you’re working on reopening. If you have purchased the property and are have mortgage payments, those will be covered as well.
If you have business loans taken out before the shutdown, your ban will still expect you to pay them – even if you’re not making any money. This is where business interruption insurance can kick in and ensure you don’t miss any payments.
Even if your business is temporarily not generating revenue, you’ll still have to meet your tax obligations. Business interruption insurance will ensure that you have the necessary funds to pay the taxes you owe. And just as is the case with most business insurance policies, a business interruption policy is also tax-deductible.
As we already mentioned, you can purchase extra expenses coverage to add to your business interruption policy in order to cover the costs required to move your business to a new location temporarily. This covers rent for the new space, renting equipment, hiring new employees if necessary, and providing them with training as well.
If your staff need training in order to learn how to operate new equipment after a covered loss, business interruption insurance will cover these training costs as well.
If you’re forced to relocate your business due to property damage, business interruption insurance will respond and help cover the moving costs.
It’s important to remember that the insurer is only liable for losses during the restoration period. The restoration period is the amount of time that it will take you to rebuild or replace all of your damaged property. It is commonly defined by the insurer within your contract.
The period of restoration begins on the day that the damage occurred and it ends when the business is expected to be ready to resume its regular operations. It’s also important to note that the restoration period doesn’t necessarily have to end when the policy expires.
It’s only important that the losses occurred during the policy period in order for coverage to be activated. Businesses can easily obtain a business interruption endorsement in order to provide coverage for the entire period of restoration if the policy expires before the business is ready to reopen.
Typically, the restoration period covers up to 12 months of losses. However, some insurers might cover up to 18 or 24 months.
As already mentioned, natural disasters such as earthquakes and tornados are not covered by builders risk. Contractors or developers will need to add a severe weather endorsement to the policy in order to address those types of risks if they do exist.
Anyone purchasing a builders risk policy needs to make sure that they are aware of the limitations and exclusions that the policy includes:
Some standard exclusions that are often written into a builders risk policy include:
We already talked about the importance of being aware of the budget of your construction project when discussing your coverage limits. But to reiterate, the policy limit should be close to the value of the finished structure when all costs are taken into consideration (materials, labor, land value, etc.).
Knowing your construction costs will also help you to get a good idea of how much you can expect to pay for your builders risk policy as well.
A builders risk policy usually costs between one and four percent of your construction costs. Naturally, the number of exclusions and your specific coverage needs will dictate the costs most prominently.
The greater the projected costs of your construction project and the more endorsements you need to include to avoid typical exclusions that could pose risks to the developers and contractors, the more you will pay for your policy. For more specifics, read our full guide on builders risk insurance cost.
Your builders risk insurance policy expires once one of these events occurs; the property is sold, the property is occupied, or the policy itself expires.
Once your builders risk insurance expires and is no longer valid, it is important to secure the right property insurance to protect the finished product, be it a commercial property policy or a homeowner’s policy.
Explore real-world scenarios of how this coverage has supported businesses
A Chicago subcontractor who worked on a property featured on the reality TV show “Windy City Rehab” sued co-host Donovan Eckhardt and his company, saying he’s still owed money for work he did on another rehabbing project.
Ascent Construction alleged that it was a victim of constructive fraud, negligent misrepresentation, and a breach of contract — third party beneficiary in its lawsuit against the defendants.
Psomas, a construction firm active across California, filed a breach of contract complaint against Shenzhen New World Group regarding the Chinese developer’s planned $700 million redevelopment of the LA Grand Hotel.
A housing contractor faced a lawsuit from the state of Missouri. He was accused of taking money for various home repair projects, not doing the work, and not providing a full refund to customers.
Skip the hassle — get cyber coverage the easy way and protect your business with tailored coverage.
