I'm sure business owners on the Outer Banks of North Carolina could argue the need for business interruption coverage. The extended power outage and mandatory evacuation of all tourists is impacting business owners. A motel operator near Hatteras NC has had to refund all the motel's reservations, and has already lost tens of thousands of dollars. When told the evacuation may last two weeks she said, "People make money in summer to live through the winter. Two weeks would put us out of business." The businesses on the Outer Banks may get coverage from the company that damaged the power lines, but will it be timely enough to keep them in business?
While you may not be faced with that type of dilemma, imagine a fire destroys the building your business is in. How long can your business stay closed while the building is repaired or replaced? Or an ice storm brings down trees and power lines causing a loss of power for 17 days (remember the ice storm of 2008 in central MA?). Without income coming in would you be able to pay your bills like rent, payroll or the cost to operate from another location? Business interruption coverage compensates you for lost income, pays for your fixed operating expenses like rent and utilities, and, with extra expense coverage, pays the additional expenses of operating from another location. It may also include payroll to help you keep your employees and avoid the cost of hiring and training a new staff.
Business interruption or business income insurance is not a separate policy. It is a coverage added to your property, business owners or commercial package policy and provides additional coverage for losses covered under the main policy. So while your typical property insurance policy will cover the cost to repair or replace buildings or equipment, it will not cover the loss of income to the business during this period or any additional expenses incurred because of the loss.
Costs vary depending on the type and size of business, the risk of loss, and the amount of coverage you need. Talk to your agent about your risks and ability to withstand a prolonged closure to determine if business interruption coverage is right for you.