Business Interruption Insurance: Cost, Coverage & Providers

Business interruption insurance, aka business income insurance, covers the lost income of a business that has to cease operations due to damage from a covered event under a property insurance policy, such as fire or wind. Pricing for coverage varies, but the average cost of business interruption insurance ranges from $750 to $1,200 per year.

To make sure you’re protected against a potential loss of income, contact The Hartford. Their team will assess your needs to find the most affordable insurance policy. Get your free, no obligation quote in minutes.

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Top Business Interruption Insurance Providers

Business Interruption Insurance Providers

The best insurance providers for business interruption insurance will be companies that include this coverage in a business owners policy (BOP), along with general liability and commercial property insurance. While it comes standard with a BOP, when bought on its own, business interruption insurance typically costs $750 to $1,200 annually.

Here are five of the best insurance providers offering business interruption insurance policies:

1. The Hartford

The Hartford is one of the best small business insurance providers in the nation, and their business interruption insurance is a primary offering in their extensive lineup of coverage types. Their business income protection comes in seven different types, including business income “extensions” for essential personnel, cloud service interruption, off-premises operations, and more.

Small business owners looking for a larger insurer that has a broad range of business income insurance offerings will want to take a close look at The Hartford, which is also known for their highly rated claims service.

2. Farmers Insurance

The typical business interruption coverage won’t begin for 48 to 72 hours after a cease in operations is caused by a covered event. Keeping this in mind, Farmers Insurance helps guide their business customers through the first 48 hours with information on alternate business sites and contact information for key personnel.

Their Business Resumption Plan (BRP) acts as more than just insurance; it’s a plan to help you get back to business after a cease of operations. Farmers Insurance can be a smart choice for business owners who want added service in the initial 48-hour down time before business income coverage kicks in.

3. AP Intego

AP Intego specializes in all the coverage that your small business needs to be protected. AP Intego is a nationally licensed broker, which means you have access to the top-rated insurance companies such as Travelers, and AmTrust. Let their dedicated agents get you the right coverage at the best possible price.

4. Nationwide

Nationwide is the best provider for commercial property insurance, which is the foundation of business interruption insurance. Their basic business income coverage can be expanded to include utility services damage in the event you have a power outage and loss of income due to a covered event such as high winds taking down a power line.

When your property is damaged or destroyed, and you need business income coverage, a large provider like Nationwide, which specializes in protecting commercial property, can be a wise choice. This is because business interruption insurance is an extension of commercial property insurance, and this expertise is a great asset to look for in a provider.

5. Travelers Insurance

Travelers Insurance offers Extra Expense coverage in addition to their business interruption coverage, and not every provider offers this extended protection. For example, if your business had to close for several days due to a fire, business interruption insurance would cover your lost income, while Extra Expense coverage would cover added expenses incurred due to running your business offsite.

If you need basic business interruption insurance plus the option of adding the Extra Expense coverage option, Travelers Insurance can be a smart choice for your business. Plus, they’re great for helping you with all the information needed to make the application process for business interruption insurance easy.

Cost of Business Income Insurance

The cost of business interruption insurance averages between $750 and $1,200 per year, but can be much higher for some businesses. Determining factors that may increase the cost for business interruption coverage include larger business size, higher coverage limits, and if your company is located in an area with a high risk of natural disasters.

For example, a large, high-income trucking business that carries hazardous materials across state lines may pay $10,000 per year in premium because of the added risk. A small business located in an area at low risk for a natural disaster may pay as little as $750 for a policy.

Keep in mind that business interruption insurance is commonly included in a business owners policy (BOP) as part of the commercial property insurance. It is therefore rarely sold as a standalone policy.

Tips on Applying for Business Interruption Insurance

Business interruption insurance is not a standalone policy that is purchased on its own. It is usually included as part of a business owners policy (BOP), specifically as part of the commercial property insurance coverage within the BOP. Therefore, you won’t specifically apply for business interruption insurance, but you will need to know what to look for when applying for your small business insurance policy.

Here are the three main things to evaluate when applying for business interruption insurance:

1. Determine How Much Business Income Coverage You Need

Like other insurance types, business interruption insurance will have a coverage limit, which is the maximum amount your provider will pay if you have a claim. If you had a claim that exceeded your coverage limit, you would be responsible for this amount. For this reason, it is important you have a good idea about what it would cost to restore your business if your building and the contents were damaged or destroyed.

Before getting quotes and applying, be sure to have documentation, such as financial statements, that show your revenue. This will provide the information needed to determine how much business interruption insurance you’ll need and how much you’ll get paid.

2. Estimate How Long It Would Take to Restore Business Operations

Part of estimating the potential cost of a business interruption insurance claim is the amount of time it may take to restore your business after a loss. This period of time, called the “restoration period,” will help determine how much profit you might lose. The restoration period can vary based on the degree of damage to your premises. A small fire may require only a 30-day restoration period, while a major event like a tornado may require months.

3. Confirm Business Interruption Coverage in BOP

Most insurance companies include business interruption coverage in a business owners policy (BOP). If you purchase this policy, confirm that the business income coverage included in the BOP is sufficient for your business. Therefore, when applying for small business insurance, confirm first that you have business income coverage and then speak to the insurance provider about your coverage needs.

If you have a BOP, consider increasing business interruption coverage, according to Tabatha Myers, Myers & Hayden Insurance:

“If you’re just talking about BOPs, Business Interruption is always included at ALS (Actual Loss Sustained) for 12 months. You can typically increase the period of indemnity to 18 or 24 months for a negligible charge. If you’re insured on a commercial package policy other than a BOP, you’ll need to endorse Business Interruption onto the policy. Some carriers will endorse a specific dollar amount and period of time, others will endorse ALS for a period of time.”

How Business Interruption Insurance Works

Business interruption insurance covers lost income if your business has to cease operations due to damage from a covered event under your property insurance policy, such as fire or wind. Business interruption insurance is not typically bought as a standalone policy. Most insurance providers include it as an extension of your property coverage, which means it is usually included in a business owners policy (BOP).

Here are some terms to know to help you better understand business interruption insurance:

• Actual Loss Sustained: As this term implies, your business interruption would cover the actual loss sustained by your business as a result of direct physical loss or damage to your property by a covered event. Your insurer would only be obligated to pay if you actually sustained an interruption of business leading to a business income loss.
• Business Income: This includes the net income (net profit or loss before income taxes) that would have been earned or incurred by your business and the continuing normal operating expenses incurred, including payroll, of your business.
• Period of Restoration: This is the period of time for which insurers are liable for the loss of business income, which is often defined as the length of time required to rebuild, repair, or replace the damaged or destroyed property.

What Business Interruption Insurance Covers

Business interruption insurance is often called business income insurance because it replaces the income your business would have earned, based on your records, if the damage or destruction of your property had not occurred. The policy also covers operating expenses, such as utilities and payroll, that continue even though normal business operations have temporarily ceased. Coverage can also include the expense of moving to a temporary location.

Business interruption insurance typically covers these expenses and perils:

• Income you would have earned if the incident had not occurred.
• Normal operating expenses that need to continue, such as utilities and payroll, even though the business is closed.
• Expenses of moving your business to a temporary location, including moving and rent costs.
• Covered events typically include fire, theft, wind, falling objects and lightning.

What Business Interruption Insurance Doesn’t Cover

Although business interruption insurance can help you replace lost income and pay expenses while your business is closed due to a covered event, it won’t pay for every cost your recovering business may incur. Therefore, it’s important to keep these exclusions in mind when applying for your policy.

Common exclusions of business interruption insurance include:

• Utility bills that are no longer being charged to you during the temporary closure of your business due to damage or destruction of your property.
• Income that isn’t documented in your financial records. Keep this point in mind when applying for coverage. Be sure to have complete documentation of your income so you won’t miss out on benefits if and when you need them.
• Losses from closures caused by damages not covered in your property insurance policy, such as flooding or earthquake.

It’s also important to note the waiting period for coverage to begin. This waiting period for most business interruption policies is 48 to 72 hours.

Other Types of Small Business Insurance You May Need

Since business interruption insurance is not sold as a standalone policy, it is usually part of commercial property insurance and is often included in a packaged policy, called a business owners policy (BOP), along with general liability insurance.

The primary small business insurance types you may need include:

1. Commercial General Liability

Commercial general liability (CGL) insurance covers third-party bodily injury, property damage and related legal costs. CGL is the most common policy type purchased by small business owners. It’s especially important coverage for small business owners who interact with the public or work directly with their customers.

For example, if you have a physical location with foot traffic from customers or if you work on a site open to the public, you’ll need a CGL policy in the event a customer or other third party is injured or their property is damaged.

2. Commercial Property Insurance

Commercial property insurance protects against losses due to fire, theft, vandalism, and extreme weather. These are also the covered events for business interruption insurance, which can be considered an extension of your commercial property policy.

For example, if you work out of a physical location and you own the building, commercial property insurance would cover damage to the building and the contents if you suffer a covered event, such as fire. If your business has to temporarily close as a result of the fire, your business interruption insurance would cover the lost income.

3. Commercial Auto Insurance

Commercial auto insurance is needed if you use your vehicle for purposes other than commuting to and from your business. This coverage protects you if your commercial vehicle is in an accident where third parties are injured or suffer property damage and you are held liable.

For example, if you own a business in an industry, such as construction and contracting, that requires traveling to various job sites and you get into an auto accident, your commercial auto insurance will cover injuries and property damage suffered by the other driver and their passengers.

4. Workers Compensation

For businesses with employees, workers compensation is required coverage in most states. Workers comp insurance provides benefits to your employees in the event of work-related injuries or illnesses.

For example, if one of your employees tripped and fell at your work location and was injured, your workers comp insurance would pay medical bills and wages from lost work time, if applicable.

5. Commercial Umbrella Insurance

Commercial umbrella insurance adds additional coverage to other insurance types, such as commercial general liability. Umbrella insurance typically increases the limits of coverage by $1 million, and is most needed by business owners who are at high risk of lawsuits.

For example, if you have business interruption insurance included with your commercial property insurance that has a $1 million limit, and your company was sued and had legal expenses of $1.2 million, your umbrella insurance would cover the extra $200,000.

Who Needs Business Interruption Insurance

Businesses that rely on a physical location and assets, such as equipment or machinery, to generate income should have business interruption insurance. For example, service businesses, such as retail stores, hair salons, and restaurants, need their buildings to operate and generate revenue. These businesses need business income insurance.

Don’t overlook your potential need for business interruption insurance, according to Brad Plothow, VP of Brand & Communications, Womply:

“Our research suggests that one in five small businesses would shut down within 30 days if sales stopped, yet only 23 percent have business interruption insurance. This means any hiccup in cash flow can put the business at risk. For example, 67 percent of owners with less than a month of reserves consider floods, fires, and other disasters ‘extremely damaging,’ but only 14 percent have business interruption insurance to maintain cash flow during a stoppage. In general, business owners aren’t properly insuring themselves against risks to revenue.”

Bottom Line

Business interruption insurance, also known as business income insurance, is usually included in a business owners policy (BOP). However, small business owners who rely on their physical locations to generate income should still confirm they have this coverage and possibly consider increasing it. To be sure you have sufficient coverage from business owners insurance, speak with an insurance professional.

The experts at The Hartford will help identify your exact coverage needs to find you the best insurance policy for the most affordable price. Get your free quote today.

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