What Additional Coverages Are Available With Business Interruption Insurance?

Business income and extra expense coverage or business interruption coverage provides financial protection for certain expenses that can arise if a business is forced to pause its operations or temporarily close its doors due to direct physical damage incurred by covered perils. Business income and expense policies also offer additional coverages and extended coverages. This blog reviews common additional and extended coverages to business income and extra expense policies.

Business Income and Extra Expense: Additional Coverages

The business income and extra expense coverage form also offers additional coverages for organizations to consider. Here’s a breakdown of these offerings:

• Civil authority coverage can help compensate for typical operating costs and extra expenses incurred during government-mandated business closures (e.g., citywide curfews, local evacuation orders or temporary road closures) caused by covered perils. This coverage generally kicks in 72 hours after a government-mandated business closure begins and lasts up to four consecutive weeks.
• Alterations and new buildings coverage can help pay for typical operating costs and extra expenses sustained from disruptions caused by covered perils that result in direct physical damage to new commercial buildings or structures, whether the property is complete or under construction; alterations or additions to new commercial buildings or structures; and construction- or occupancy-related machinery, equipment, supplies and building materials stored at or within 100 miles of an insured location.
• Extended business income coverage can help reimburse lost income incurred during the time frame after the restoration period for a disruption ends and before normal operations are able to resume fully. In other words, this coverage offers an extended period of indemnity that applies when direct physical damage due to a covered peril has been repaired, but operations have yet to return to business as usual. In most cases, extended business income coverage lasts for either 60 days following the end of the restoration period or the length of time it takes after this period for operations to be restored to the volume and speed required to generate the level of income that would have been reached had the disruption not taken place—whichever is shorter.
• Interruption of computer operations coverage can help compensate for typical operating costs and extra expenses sustained by interruptions in computer operations stemming from the destruction or corruption of electronic data due to covered perils. It’s worth noting that covered perils for this coverage differ from perils listed for other business interruption insurance offerings; rather, these perils are all electronic in nature (i.e., viruses and harmful code injected into computer systems or networks that were designed to destroy this technology or disrupt its usual operations). ISO generally restricts this coverage to a maximum of $2,500 unless a different amount is listed in the policy declarations.

Business Income and Extra Expense: Coverage Extensions

Besides additional coverages, the business income and extra expense coverage form gives organizations the option to obtain several coverage extensions. These extensions include the following:

• Newly acquired locations—This offering extends business interruption coverage to disruptions caused by covered perils that inflict direct physical damage to commercial property at newly acquired locations for a specified period. In particular, this extension applies to property at any newly acquired location (apart from fairs and exhibitions) for a maximum of $100,000 per location unless a different amount is listed in the policy declarations. This extension remains valid until either the business interruption policy expires, 30 days have passed since the location has been acquired or construction has begun, or property values are reported—whichever happens first.
• Off-premises utility failures—This offering extends business interruption coverage to disruptions caused by off-premises utility failures. Namely, this extension can help reimburse lost income arising from the interruption of off-site utility service lines or any plants, substations and equipment that supply these services (e.g., gas, water, steam, sewer, electrical and telecommunication).
• Dependent property—This offering extends business interruption coverage to disruptions caused by covered perils that inflict direct physical damage to property deemed essential to business activities but operated by another party (e.g., customers, suppliers or business partners).

Contact us today to review your business insurance policies to see if business income and extra expense coverage is beneficial to your business.