Business Interruption Insurance in Vermont
What is Business Interruption Insurance?
When businesses are affected by disasters, the effects sometimes last much longer than the disaster itself. The recovery process often takes time, and during that time revenue often suffers. Business interruption insurance policies can help Vermont businesses survive revenue drops that follow covered incidents.
Business interruption insurance is a unique type of commercial insurance. Instead of safeguarding physical property from perils or businesses from liability lawsuits, this insurance provides protection against certain revenue decreases. For businesses that go through these decreases, having this coverage is sometimes the difference between surviving financially and declaring bankruptcy.
What Businesses in Vermont is Business Income Insurance Right For?
There are lots of businesses in Vermont that may benefit from business income insurance. The advantages that an alternative source of revenue provides aren’t limited to just one industry or kind of commercial enterprise. Just a few examples of various business that might want this coverage are:
- Restaurants, which may experience a drop in customer traffic after a disaster
- Hotels, which may have a lengthy rebuilding process after a disaster
- Manufacturers, which may have to front production costs after a disaster
Generally speaking, any business that would be unable to pay its bills in the weeks and months after a major disaster should consider getting business income insurance. Without insurance, mounting accounts payable could force a business to close before revenue returns to normal levels.
Can Businesses Self-Insure Against Revenue Drops?
While it’s possible for some businesses to self-insure against revenue decreases, this isn’t possible in all industries and it’s not advisable in many. Businesses that have large operating costs or low margins may struggle to accumulate sufficient savings. Any businesses that are able to accumulate enough savings must then keep that money readily available, which means it can’t be invested in opportunities that could lead to growth.
Many businesses choose to purchase an insurance policy rather than divert lots of resources into savings. While each business can conduct its own analysis, the opportunity cost is too great in many situations to justify self-insuring.
What Kinds of Perils Does Business Income Insurance Cover?
In general, the perils covered by business income insurance are similar to those that commercial property insurance covers. They tend to be incidents that are out of a business’ control, such as fires, windstorms and burglaries. (Exact coverages are dictated by a policy’s particular terms and conditions, and coverages may vary.)
Importantly, business income policies normally aren’t designed to insure against market forces or business decisions that lead to decreases in revenue. Business owners must still be familiar with their industry and make wise decisions to attain long-term success.
Are There Different Types of Business Interruption Policies?
There are several different types of business interruption policies that are available to businesses. A few of the more commonly purchased options include:
- Standard Business Interruption Coverage, which normally offers benefits until operations resume
- Extended Business Interruption Coverage, which normally offers benefits for a certain amount of time (e.g. 30, 60 or 90 days) after operations resume
- Contingent Business Interruption Coverage, which normally extends coverage to revenue decreases caused by certain vendor and supplier issues
How Can Businesses in Vermont Get Business Interruption Insurance?
For help finding insurance for potential revenue decreases, Vermont businesses should contact an independent insurance agent who specializes in business interruption insurance. An agent who’s assisted other businesses with this type of insurance will know which kind of business interruption coverage is appropriate in different situations. As an independent agent, they’ll also be free to recommend any policy that’s best for a business regardless of what company underwrites it.