What Is Business Interruption Insurance?
Imagine you own a thriving business. Suddenly, an unforeseen disaster such as a fire or flood happens and brings your operations to a halt. Your revenue takes a significant hit. How do you continue to meet your financial obligations like salaries, rent or loan repayments? This is where Business Interruption Insurance comes into play.
Simply put, Business Interruption Insurance – sometimes known as business continuity insurance, business income insurance or simply BI insurance – is cover to protect lost income and operating expenses if your business is disrupted due to unforeseen circumstances such as natural disasters or other calamities. Its primary aim is to get your business back to the financial position it would have been in had the interruption not occurred. In other words, it helps you recover, rebuild and keep your business afloat during challenging times.
Speak to one of AIB’s expert business insurance brokers today to find cover that is suited to your business needs.
Who Should Consider It?
If you run any kind of business that could be impacted by an insurable catastrophic event such as fire, flood, storm damage or other natural disaster, then including Business Continuity Insurance in your cover should be a priority. Small and medium businesses and those in the retail sector are particularly vulnerable to major disruption.
For most business owners, there are ongoing expenses that you need to pay even if you’re not generating any revenue – like staff wages, supplier invoices, rent or loan repayments.
Business Interruption Insurance can get you through a temporary crisis by protecting your cash flow – so you can pay these expenses and help ensure the future of your business.
What It Can Cover
Business Interruption Insurance can cover the loss of any sales you would have made while your business is out of action – plus any extra costs you incur to stay open. AIB can help you find the right level of cover for your needs. Depending upon the policy, Business Interruption Insurance can cover:
Loss of Revenue/income
This includes Income that would have been earned during the period the business cannot operate.
Fixed costs
Operating expenses and other costs still being incurred by the property (based on historical costs) such as wages, rent, supplier charges.
Temporary Relocation
The extra expenses for moving to, and operating from, a temporary location.
Recovery Costs
Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operating while the property is being repaired.
Civil authority ingress/egress
Government-mandated closure of business premises that directly causes loss of revenue such as street closures.
Exclusions, the excess you need to pay and limits of liability can vary greatly depending on your insurer. AIB can help you find a policy that suits your needs.
How Can Business Interruption Insurance Protect You?
Case Study
Linda is the owner of a small office supplies business – with eight staff on the payroll and numerous suppliers.
Late one night, the restaurant next door catches fire and it spreads to her business premises – destroying the property along with the stock and IT systems. She’s unable to open the shop for weeks while the building is being repaired. Because the business isn’t operating, she’s not making any money – meanwhile the bills are piling up.
But with Business Interruption Insurance, Linda banks an insurance payment – maintaining her cash flow at pre- interruption level. Linda can continue paying her staff their regular wages, so they keep their jobs, and rents a temporary location so the store can keep running.
What is business interruption insurance?
Business interruption insurance provides cover for loss of income and operating expenses when your business is temporarily unable to operate due to an insured event such as a fire, flood or other disaster. The primary aim of business interruption insurance coverage is to get your business back to the financial position it would have been in had the interruption not occurred.
Is business interruption insurance the same as business continuity insurance?
There are a few terms that generally mean the same thing including: business interruption insurance, business continuity insurance and business income insurance. Sometimes you might even see it abbreviated to BI insurance. The product offerings of different insurers might influence what term is used e.g.business continuity can also encompass planning and risk management beyond just financial coverage.
What does business interruption insurance typically cover?
Business Interruption Insurance can cover the loss of any sales you would have made while your business is out of action – plus any extra costs you incur to stay open. Business income insurance typically covers loss of revenue / income, ongoing fixed expenses (like rent or wages), temporary relocation costs and additional expenses needed to resume operations. It can also cover ‘Civil authority’ or Government-mandated closure of business premises that directly causes loss of revenue such as street closures.
What isn’t covered by a business continuity policy?
Exclusions, the excess you need to pay and limits of liability can vary greatly depending on your insurer. Talk to your broker to find out the specific events that will trigger your business interruption insurance coverage.
How much does BI insurance cost?
There are a number of factors that can influence the cost of your cover including: the size of your business, number of employees, the industry you’re in, prior losses you may have experienced and the location of your business. If you’re in an area with a known higher risk of certain covered events, this may increase the cost of your policy.
Do all businesses need business income insurance?
Most businesses can benefit from business income insurance, especially those reliant on physical premises or key equipment. It ensures ongoing financial stability in case of unexpected disruptions.
What are the benefits of business interruption insurance?
Business interruption insurance helps maintain your business’s financial stability during unexpected disruptions. It ensures you can continue paying key expenses, support staff wages, meet loan repayments and recover faster without depleting cash reserves or taking on debt.
