Business Interruption Insurance – An important endorsement for BOP

Business Interruption Insurance or Business Loss Insurance is an often neglected but necessary endorsement. Why should you advise your clients to add this to their business insurance cost? And more importantly, what do you need to tell them before they buy it? Read on to find out. 

Cost of Business Insurance – why should your client add to it?   

A business running is a business earning. But what do you do when you have to close up shop for any reason?  

You have no income to sustain yourself, pay your employees’ wages, or pay the bills. 

As an insurance agent, you do not want your client facing this. 

So, what should you do to protect them?  

Advise them to get the Business Interruption Insurance endorsement. The endorsement gets added to their Business Owner’s Policy (BOP). It will protect them against any loss of income. 

Isn’t it just extra business insurance cost? 

Yes, it’s an extra business insurance cost, but it’s a necessary one. Business loss insurance will be there to prop up your insured when things go south with their business. 

What is Business Interruption Insurance? 

According to Investopedia, business interruption insurance covers business income loss during a disaster. This disaster could be a fire, a flood, or anything else.  

The definitions used on the policy paper will define what kind of accidents are covered. The coverage can, and will, vary between policy providers. The agent is responsible for advising the insured about the same. 

Since it covers loss of income, business interruption insurance is also called business loss insurance. 


Business Interruption – what does it mean?   

As said before, the coverage of the insurance itself will depend on two factors:

  • Disasters stated in the BOP.

The BOP is the starting point for what kind of income loss will be insured. BOP is essential for any business your client runs. Business interruption insurance is an endorsement to the BOP. Hence, the wording on the BOP is significant. It is up to you to make sure that BOP and business loss insurance work in tandem.

  • Disasters stated in Business Interruption Insurance policy.

The Business Interruption Insurance policy itself will carry a list of all the risks and disasters it covers. If it’s not on the policy paper, the insured cannot make a claim. It’s up to the agent to ensure that all possible disasters are there on the policy.

What will Business Loss Insurance cover?     

Resuming business soon after an accident is crucial if you do not want to lose out to competitors. But some disasters can be so grave that it takes a while to recover.  

According to NFPA, every 24 seconds, a fire department in the US responds to a fire somewhere in the country.  

What happens if one of these calls is from your client’s business? 

Their business insurance will cover the cost of restoring premises, but what about lost income for the period of restoration? 

That’s where business loss insurance comes in. 

So, what are the coverages that your client will receive?  

  1. Profits: The policy will reimburse any profit lost because of the event. The amount of profit gets calculated using earning records from previous months.  
  2. Monthly costs: Operating costs and expenses can also be covered. 
  3. Location change: If your client must move their business to a temporary location, their regular business insurance cost will not include this expense. The payment for this temporary location change gets covered by the business loss insurance. 
  4. Taxes: Businesses are required to pay taxes on time. The endorsement protects your clients from penalties they may incur if they fail to pay their taxes. 
  5. Loan payments: If your client has loan payments due, the business loss insurance helps them 
  6. Payroll and wages: During any shutdown, the business still has to pay its employees. This coverage lets companies maintain payroll even when no income gets generated. 
  7. Extra expenses: Some carriers will reimburse reasonable costs not explicitly mentioned in the policy.  
  8. Civil authority ingress/egress: This applies to cases where the business owner cannot open shop because of government-mandated closures such as curfews. 

With such a variety of coverages, this endorsement protects the insured. Above all, it gives them room to breathe while they recover from their losses.

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A word of warning! 

The business loss policy only covers losses resulting directly from the business interruption. If your insured’s business does not directly suffer, your insured cannot file claims.  

Not just that, as with any other business insurance costs, there are limits to the coverage. Limits get tailored to the individual needs of a business. As a result, it’s up to the agent to ensure that limits reflect their insured’s needs. It’s up to you to make sure that your insured is not short-changed.

In a nutshell 

Business Interruption Insurance is not about eating into your client’s profits by adding to their business insurance cost. It’s about providing your insured support as they rebuild their business after a disaster.  

Do you agree with us? How often do you recommend Business Interruption Insurance to your customers when they buy their Business Owner’s Policy? Let us know in the comments below! 

Learn how you can flourish as an agent after one call!

Schedule a call right now and learn how you can ease your work, sell more, and increase your profits!

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