Business interruption insurance construction site photo with insurance document illustration in left corner

As a contractor, you may have realized that taking care of every detail will not be enough as there are always going to be risks associated with your work. Whether it’s the risk of an unexpected accident or a project running over schedule and costing you money, there are many things that can go wrong. One way to help protect yourself from some of these perils is by having business interruption insurance for construction. This type of insurance can help ensure that you’re able to continue operations if something happens that causes you to lose income. 

It can also be a lifesaver, as it will provide additional support to your business through the length of time it shuts down due to an event like a fire or theft. It’s important to understand what this insurance covers, and how to get the most out of it if you need to file a claim. Here’s what you need to know about this type of insurance for the construction business.

What does business interruption insurance cover?

Business interruption insurance can cover a wide range of potential losses when a claim forces you to temporarily close your business. These include financial losses from reduced income streams or damaged equipment. Additionally, it also can help protect against downtime caused by extreme weather events or other disruptive conditions.

For example: Let’s say a flood enters and damages your business, leaving the building obsolete for a month as well as destroying valuable equipment and tools. While commercial property insurance covers the cost of repairs, you would not be able to make money while your business is under maintenance.

Business interruption insurance may help you compensate for the loss of income, and based on your last few months of performance, the policy will provide reimbursement for profits that would have been earned if the event hadn’t happened.

It will also cover additional costs related to rebuilding or relocation. If the property needs to be completely restored or moved to another place due to irreversible damages, it will pay for the moving costs and the rent in the new location.

Moreover, it covers the cost of employee wages and operating expenses, as well as lost profits due to fewer customers. If your business does not want to lose employees while ceasing production, it can take care of the payroll up to one year of salary for each employee.  

This is vital for construction companies, as they are often working on tight timelines and can’t afford to have any delays. Even a short interruption in work can lead to big financial losses. 

Learn more: Schedule Delay – How to Assess & Reduce Impact in Construction

It is worth mentioning that these policies usually exclude claims unrelated to property damage, as most insurers do not write coverage for events for which the extent of potential damage is not easily understood.

Although it is possible to add endorsements to cover business interruption exclusions — like a large-scale economic disrupter such as the COVID-19 pandemic for instance — you will have to search for this option in a specialty market that insures coverage which standard carriers won’t include.

How much does business interruption insurance cost?

When shopping for business interruption insurance, be sure to compare quotes from multiple insurers. This will help ensure that you’re getting the best possible rate.

The cost of business interruption insurance will vary depending on a number of factors, including the size and type of business, the location, and the amount of coverage you need. You’ll also need to consider the deductible, which is the amount you’ll be responsible for paying before the insurance kicks.

Getting the most out of your business interruption insurance policy

Like any insurance policy, business interruption insurance is a contract between you and the insurance company. It’s important to read over your policy carefully so that you understand what is covered and what isn’t. You’ll also want to make sure that you’re clear on the conditions that need to be met in order to file a claim. 

It’s always a good idea to review your policy regularly. This will help you get familiar with any content you first found to be complex, and even let you know when it’s necessary to modify any section due to outdated information. On top of that, do not forget to double-check whether your coverage limit is adequate for your requirements and that you’re not overpaying for coverage that you don’t need. 

In general, business interruption insurance for general contractors costs between 0.25% and 0.75% of the business’s total annual revenue

How to get business interruption insurance

If you’re interested in getting business interruption insurance, the first step is to speak with your insurance agent. They’ll be able to help you determine if this type of insurance is right for your business, and if so, how much coverage you need.

You can also get business interruption insurance as part of a Business Owner’s Policy (BOP). This type of policy bundles together several types of coverage, including property damage and liability insurance. Considering them will help you weather the financial storm if something does go wrong — it’s an important part of any business’s risk management strategy.

Learn more: 17 Types of Insurance for Construction Businesses

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