What is Business Continuity Insurance?

"Business Continuity Insurance" is commonly known as Business Interruption Insurance. It helps cover lost income and operating expenses if your business is temporarily unable to operate due to a covered event—like a fire, storm, or other disaster.

It’s usually part of a Business Owner’s Policy (BOP) or Commercial Property Insurance.

✅ What Does It Cover?

✔ Lost Income – Revenue you would’ve earned during downtime.
✔ Operating Expenses – Rent, payroll, utilities, loan payments, etc.
✔ Temporary Relocation Costs – If you have to move to a new location temporarily.
✔ Training Costs – If employees need to learn new systems after repairs.
✔ Extra Expenses – Additional costs to get back in business faster.

🚫 What It Doesn’t Cover:

❌ Flood or earthquake damage (unless added via rider or separate policy)
❌ Undocumented income
❌ Pandemic-related losses (often excluded unless specifically covered)

📌 Example Scenario:

Your bakery burns down in a fire. Business Interruption Insurance helps:

  • Pay your employees

  • Cover lost profits

  • Rent a temporary kitchen

  • Keep paying rent on your original space

💰 How Much Does It Cost?

Usually added onto a BOP, and cost depends on:

  • Your industry

  • Revenue

  • Risk exposure

  • Location

What is Commercial Property Insurance?

Commercial Property Insurance is a type of insurance that provides coverage for physical assets owned by a business, including buildings, equipment, inventory, and other tangible property. It protects the business against risks such as fire, theft, vandalism, natural disasters, and other covered events that might cause damage to or loss of property.

Key Features of Commercial Property Insurance:

  1. Building Coverage

    • Covers damage to the physical structure of the building where your business operates, including walls, roof, and fixtures.

    • Example: If a fire damages your office building, this policy would help pay for repairs or rebuilding.

  2. Contents Coverage

    • Covers loss or damage to the contents inside the business property, such as equipment, machinery, furniture, inventory, and other business property.

    • Example: If a break-in results in stolen computers, this insurance would help cover the cost of replacing them.

  3. Business Interruption Coverage (Loss of Income)

    • Provides coverage for lost income if your business has to temporarily close due to a covered event (e.g., fire, storm).

    • Example: If your restaurant is damaged in a storm and cannot operate for several weeks, business interruption insurance would help replace lost revenue during that period.

  4. Additional Structures Coverage

    • If your business property includes additional buildings or structures (e.g., warehouses, storage units), this coverage protects them as well.

    • Example: If your warehouse is damaged in a flood, this insurance will cover repair costs.

  5. Ordinance or Law Coverage

    • If your property is damaged and needs to be rebuilt to meet updated local building codes, this coverage can help cover the additional costs that are not typically covered by standard policies.

    • Example: If new safety codes require certain upgrades during reconstruction after a fire, this coverage would pay for those upgrades.

  6. Equipment Breakdown Coverage

    • Covers the costs to repair or replace equipment that is damaged or breaks down due to mechanical failure.

    • Example: If your HVAC system fails and causes operational downtime, this policy would help cover the repair or replacement.

Types of Commercial Property Insurance Policies:

  1. All-Risk or Open Peril Policy

    • Provides coverage for all types of losses unless they are specifically excluded (such as war, terrorism, or wear and tear).

    • Best for: Businesses that want the broadest coverage.

  2. Named Perils Policy

    • Covers only the specific risks that are listed in the policy (e.g., fire, theft, vandalism). If the event is not named in the policy, it’s not covered.

    • Best for: Businesses that want more focused or specific coverage, and may not need protection against less common risks.

  3. Replacement Cost vs. Actual Cash Value

    • Replacement Cost: Covers the cost to replace damaged property with new property of similar kind and quality, without factoring in depreciation.

    • Actual Cash Value (ACV): Covers the cost to replace damaged property minus depreciation, so it might not cover the full replacement value.

Why Do You Need Commercial Property Insurance?

  • Protection Against Unexpected Events: Without insurance, your business could face financial ruin if a fire, natural disaster, or other catastrophe damages your property.

  • Legal and Contractual Requirements: If you lease or mortgage your business property, your landlord or lender may require commercial property insurance.

  • Peace of Mind: Provides a safety net that ensures your business can recover from property damage, allowing you to continue operations even after a major loss.

  • Business Continuity: Helps keep your operations running or mitigate lost income if your business must temporarily shut down due to property damage.