In today’s unpredictable business landscape, staying prepared for the unexpected isn’t just a smart strategy — it’s a critical necessity. From natural disasters to cyberattacks and supply chain disruptions, external factors have the potential to halt operations and threaten a company’s financial future. In fact, the Insurance Information Institute reports that 40% of businesses fail to reopen following a disaster scenario, and another 25% close within a year.
The right protection can play a pivotal role in helping a business quicky resume operations when surprises hit. Business interruption insurance is a prime example. Here, BCH’s commercial insurance professionals dive into the intricacies associated with this approach to protection. From what business interruption is to how to source the right option and tools to round out risk management needs, too, we’re here with the insights you need. Let’s get started.
What is Business Interruption Insurance?
Before getting too far into a company’s unique options and ideal approach, it’s important to understand the basics. So, what is business interruption insurance? It’s a form of commercial coverage designed to support businesses when unforeseen events require them to pause or scale back operations.
Tailored business interruption insurance can help a company get quickly back to business when disaster strikes.
Unlike property insurance, which covers physical damage to buildings, items or equipment, business interruption insurance offers protection related to lost income and operating expenses a company endures during its downtime. Whether disaster strikes in the form of fire damage to a facility, hurricane-related supply chain interruptions, a cyberattack that takes systems offline or something else entirely, this coverage can help replace lost revenue, cover fixed costs such as rent and payroll, and fund temporary relocation or outsourcing to keep operations moving.
BCH Tip: Still have questions? Our Business Interruption Insurance Overview Sheet breaks things down further.
What Risks Can Business Interruption Insurance Coverage Address?
Every business faces its own mix of obstacles related to its industry, approach to operations and outside factors such as geographic location and market health. Business interruption insurance coverage helps to mitigate a range of issues, including:
- Natural disasters such as hurricanes, floods, earthquakes and wildfires
- Fire or storm damage to a property that halts production or sales
- Major equipment failures that impact an organization’s ability to serve customers
- Outages or infrastructure issues that grind operations to a halt
- Cyber incidents such as ransomware attacks that lock teams out of essential systems
- Closures such as mandatory evacuations that force companies’ doors to close
Choosing the Right Business Interruption Insurance Policy
Finding an ideal business interruption insurance policy is about more than checking the right box. It’s about sourcing protection that aligns with your company’s specific risk profile, operations and long-term goals. Here are some factors to help guide your search.
- Understand Your Business Model: How does your company generate revenue? What resources (physical space, machinery, data, personnel and equipment) do you need to carry out work effectively? The more complex or specialized your business is, the more detailed your coverage should be.
- Evaluate Your Risk Exposure: Is your business in an area that regularly experiences extreme weather? Do you depend on a single supplier or facility to keep your company running? Understanding the unique vulnerabilities that impact operations can help you determine the scope and limits of your coverage needs.
- Know What a Strong Policy Looks Like: A solid policy should cover more than lost profits. Look for options that cover all your bases, including but not limited to:
- Fixed operational expenses such as rent, loan payments and utilities
- Payroll coverage to retain staff through shutdowns
- Relocation and equipment rental costs
- Extended recovery periods, should delays last beyond initial timelines
- Partner with a Trusted Insurance Advisor: The best policy is one that’s built around your unique approach to business. Working with an experienced commercial insurance professional can make all the difference. At Brady, Chapman, Holland & Associates, our team takes the time to understand your operations, pinpoint gaps in your current coverage and identify solutions that offer meaningful protection. It’s all about helping you protect your livelihood and the people you work with each day.
Take a Comprehensive Approach to Protection with Risk Management
While business interruption insurance is a powerful tool, it’s only one piece of the business continuity puzzle. Proactive risk management efforts can help an organization avoid interruptions altogether or recover more quickly when they do occur. Although every company’s ideal risk management approach will differ, smart strategies might include:
- Creating a detailed business continuity plan
- Regularly backing up digital data and testing system redundancies
- Scheduling preventive maintenance
- Regular employee training focused on safety, cybersecurity and emergency protocols
- Routine risk assessments to identify new or emerging vulnerabilities
Commercial insurance is there to support your operations when situations take a turn. When paired with thoughtful planning and prevention, it becomes part of a larger strategy that can help your business thrive in the face of uncertainty.
BCH Tip: Looking to better understand the unique risks your operations face? Our Minimizing Business Interruptions Info Sheet is a great place to start.
No one likes to think about worst-case scenarios, but preparing for them can make all the difference. With the right business interruption insurance, risk management strategy and partner by your side, a business is better equipped to navigate surprises — and more likely to emerge stronger after the fact.
If you have questions about business interruption insurance, how to assess your unique risks or anything else associated with keeping operations better protected, reach out to BCH at any time. Our team is on your side and here to help when it matters.