Do You Need Business Interruption Insurance?
If you’re a small business owner, not being able to operate due to a fire, flood or other event is your worst nightmare. However, the truth is that this worst-case scenario can — and frequently does — happen. The good news is that you can protect your business against any financial losses you incur as a result of not being able to operate out of your normal premises. How? By purchasing business interruption insurance in Los Angeles.
For a complete list of business insurance options available to you, visit Grand Mutual Insurance.
How Does Business Interruption Insurance Work?
The Insurance Information Institute states that business interruption insurance covers the costs of lost revenue if the cause of the business interruption is covered by the policy. It typically kicks in after 48 hours and lasts for as long as the interruption does. This is usually until the premises are restored to the same physical condition as they were before the event and you can resume operations.
The amount your policy covers, and its price will depend on your business. For example, a successful real estate company will likely have higher coverage limits than a startup, and a restaurant will have higher premiums than a bicycle store.
What Does Business Interruption Insurance Cover?
Business interruption insurance is tax deductible as a normal business expense. Here’s a detailed overview of what it can cover according to Investopedia:
- Profits: The insurance company will review your profits from previous months to determine how much you would have earned during the interruption.
- Temporary location: Depending on the type of business you run, the policy may cover the costs of relocating to and doing business from a temporary location.
- Fixed costs: This includes electricity, water, Internet and other normal operating expenses.
- Employee wages: If you have to close for a period of time and you don’t want to lose your staff, your business interruption insurance will cover the cost of their wages.
- Extra expenses: If you incur other reasonable costs in order to continue doing business, the policy might cover them.
- Training costs: Oftentimes after a fire, flood or other disaster, a business has to buy new equipment and train employees on how to use it. This can be covered by a business interruption policy.
- Civil authority egress or ingress: If the municipality has closed your street down due to a mudslide or other event, it can result in loss of business.
- Loan payments: Even if you’re not generating sufficient income to make your monthly loan payments, they’re still due. Business interruption coverage can help.
- Taxes: Your policy can also help you pay your business taxes.
Business interruption insurance is always sold as a part of a comprehensive package or as an addition to a property/casualty insurance — not as a separate policy. So, if your insurance agent doesn’t mention it, ask him or her. Remember: It could mean the difference between going under or getting back up on your feet again after a disaster!
Business Insurance in Los Angeles
Grand Mutual Insurance is a full-service insurance agency that offers insurance, both personal and commercial, to entities of all sizes. We tailor each insurance solution to our clients to ensure they receive the most value and protection. To learn more about business insurance in Los Angeles, view our Business Insurance page here.