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What Is Business Interruption Insurance?

Updated: November 2017

Business interruption insurance helps replace lost income and helps pay for extra expenses if a business is affected by a covered peril. Business interruption coverage (sometimes called business income coverage) is typically part of a business owners insurance policy.

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An Allstate agent can answer coverage questions and help you find ways to protect what matters most.

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What Does Business Interruption Insurance Cover?

Business interruption insurance helps protect against lost income due to a covered peril listed in your business owners policy. Covered perils typically include theft, fire, wind, falling objects and lightning. Read your policy to make sure you know which perils your insurance helps cover.

Let's say a fire damages your business. The fire leaves the building unfit to do business in, and it destroys your merchandise just before it was about to ship to customers. Business interruption coverage may help reimburse you in two ways:

  1. For lost income from the destroyed merchandise (minus expenses you would've already paid, like shipping).

    Your pre-loss earnings are the basis for reimbursement under business interruption coverage. Lost earnings are typically defined as revenues minus ongoing expenses.

  2. For extra expenses if you must relocate your business temporarily because of the fire (for example, rent you must pay for a temporary location).

Keep in mind that, in the scenario above, the property coverage in your business owners policy would help pay to repair the damaged building, if you own it.

How Much Coverage Do I Need?

Business interruption insurance has a coverage limit. A limit is the maximum amount your insurer will pay after a covered claim. Financial losses that exceed your coverage limit are your responsibility. That's why it's important to choose coverage limits that are appropriate for your business.

Here are a few things you may want to consider as you're choosing the amount of business interruption coverage for your business:

  • How long would it take to get your business up and running after a loss?
  • If you rent, how well protected is your building?
  • Are sprinkler systems up to date and functional?
  • Is comparable commercial space readily available in your area, or would it take weeks to find a suitable location?

You may also want to think about the likely period of time to restore your business after a loss. This "restoration period" determines how much profit you might lose and can vary greatly depending on the severity of the loss your business experiences. For example, a small fire may require only a 30-day restoration period, while a major regional event like a tornado may require months.

Thinking about buying a business insurance policy with business interruption coverage? Contact an Allstate agent today to explore your options.

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This content is for informational purposes only and may not be applicable to all situations.

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2019 Allstate Insurance Company, Northbrook, IL.
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