If your restaurant suffers a business interruption, such as a fire or hurricane, you may be able to recover some of the lost income and expenses through business interruption insurance. This coverage, sometimes called business income coverage, can be part of a business owner’s insurance policy and helps business owners replace lost income and even pay extra expenses when their business is affected by a covered cause of loss.
Let’s dive into the heart of the matter and discuss what exactly business interruption insurance for restaurants covers, how much coverage you actually need, and how to reduce business losses after an unforeseen interruption.
What does business interruption insurance for restaurants cover?
Business interruption insurance for restaurants can cover a slew of claims. From lost income and business expenses to other financial losses that occur when your business is interrupted by covered shutdowns. The coverage may also help you pay for the cost of relocating your business temporarily while repairs are being made.
Curious about the specifics?
Here is a short list of some losses that can be covered by this insurance coverage:
- Revenue that could have been made
- Rent or Mortgage payments
- Business Loan payments
- Employee Payroll
- Training Costs
- Relocation Costs
- Additional rental costs resulting from setting up at a temporary location
For example, business interruption insurance can help your restaurant business recover from a covered loss, such as theft or a fallen object destroying equipment. Some policies may even cover losses due to business shutdowns ordered by civil authorities, such as a mandatory evacuation by the government due to a disaster.
In these cases, business interruption insurance can help you replace lost income and pay for other expenses, like relocation costs.
How much business interruption insurance for restaurants do I need?
Business interruption insurance usually has a coverage limit or a limit that your insurance will pay toward the claim. And anything over the coverage limit will be your financial responsibility.
The amount of business interruption insurance you need will depend on the size and type of your restaurant and your financial needs. You’ll want to ensure you have enough coverage to replace the lost income and pay for any extra expenses resulting from the business interruption.
A few things to consider when you’re choosing your coverage limit may include:
- How long would it take to get your business back in working order after an event?
- Is your restaurant located in an area prone to natural disasters, such as hurricanes or earthquakes?
- If something were to happen to your building, are there other buildings in your area that you could occupy? Or would it take time to find another suitable space?
What is my business interruption and restoration period?
Business interruption policies generally have a “restoration period,” or the time it takes to restore your business after an event. Usually, there’s a waiting period before the restoration period starts, but it typically lasts a year once in effect.
That means if a fire damaged your building and put operations on hold on March 1, you’d receive business interruption coverage until March 1 of the following year.
How can I reduce business losses after an interruption?
There are a few things you can do to reduce business losses after an interruption:
- Keep accurate records of your income and expenses so you can easily document your lost income and business expenses.
- Have a business continuity plan in place so you know what to do in the event of a business interruption.
- Review your business insurance policies with an experienced agent to make sure you have the right coverage you need.
If you follow these tips, you’ll be better prepared to deal with unforeseen interruptions and minimize potential financial losses.
Business interruption insurance is a vital form of protection for your business, but it’s essential to understand that it does have its limitations.
Business income coverage typically excludes losses caused by gradual damage, such as water leaks or mold growth. Additionally, business interruption insurance generally will not cover lost profits if your business was already struggling financially before the loss occurred.
Despite its limitations, this coverage can be an invaluable tool for your restaurant when trying to recover from a covered loss threatening the future of your business.
If you are thinking about purchasing business interruption insurance to safeguard your restaurant from chance and circumstance, talk to your personal Lincoln Brokerage insurance agent about what coverage options are available for your unique situation and learn more about how they can help protect your business.
Don’t wait until a loss occurs to find out what type of coverage you need — talk to an insurance agent today and make sure you have the right protection in place for your business.