When a disaster, such as a fire or tornado, strikes your business location, the location may be temporarily unusable. Your business may not be able to produce income until your location is repaired. Meanwhile, your business will continue to incur fixed costs like rent and utilities.

A standard commercial property policy does not cover the loss of income caused by the temporary closure of the business.

Business interruption insurance can be included in the property insurance coverage to cover this loss. Nowadays, business interruption insurance is often called business income insurance.

Business interruption insurance covers:

• The income your business would have made during the period your business location is unusable. This amount is determined by your historic financial records.
• The costs and expenses incurred by your business even though the location is unusable. Again, these fixed costs are determined by an analysis of your historical financial records.
• Costs you incur to move to, and operate from, a temporary location if your current location is unusable
• Expenses you incur to reduce your business income loss. These expenses are covered to the extent they reduce your loss of income. For example, suppose your business depends on a particular machine in order to operate. After the machine is destroyed by a fire your company rents a similar machine in order keep your business functioning. Your insurer should pay the cost of renting the machine because your company would have generated no income if you hadn't rented it.

Business interruption insurance is one of the most valuable coverages your business can purchase. It is frequently overlooked by businesses. Many business owners fail to consider the ramifications of a shutdown. Remember that your business won't earn any income if it is unable to operate.

Some policyholders may assume that a basic property insurance policy will cover business income losses. Again, property insurance covers a physical loss or damage to a building and its contents. Unless the policy includes business interruption insurance, it will not cover a loss of income a business sustains while damaged property is being repaired. In addition, the policy will not cover fixed expenses that continue during the shutdown.

Edited by Marianne Bonner