Business interruption insurance is designed to protect the earning power of your business. It provides coverage when your business operations are unexpectedly halted due to a variety of reasons. (Business interruption coverage is also known as earnings insurance; earnings coverage; profits insurance; income insurance.)
Scenarios: A fire rips through your office complex; your $100,000 computer-assisted-design system (CADD) is stolen; a roof leak damages your inventory. True, while your property/casualty insurance covers the cost of repairing the building or equipment damage, how do you recover and maintain your business income in the meantime? Business Interruption insurance is the key to getting your business up and running again—fast.
The effects of a business interruption can be far reaching. For example, should the business remain closed for some time, you could be faced with a significant financial loss along with other challenges, such as:
Therefore, earnings insurance coverage (or income insurance protection), can provide reimbursement for salaries, rent, taxes, and other expenses, as well as projected profits that would have been earned during the time that your business remains inoperable. Depending upon your coverage, it can also help you pay for the costs involved in establishing temporary premises or paying employee overtime.
The coverage you need depends on the type of business you run. In most cases, your coverage would be for the period from the time of the loss to the time you re-open your business.
Your production line, your offices, and the services you provide could suffer from unpredictable disruptions, such as:
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