Business Interruption Insurance in Vermont

What is Business Interruption Insurance?

Disasters that impact businesses can have effects that last long after a disaster itself is over. Recovering from a fire, burglary, storm or other peril takes time, and during that time a business’ revenue may dip or disappear. Business interruption insurance helps Vermont businesses survive revenue decreases that follow after covered incidents.

Business interruption insurance policies are unique from most other commercial policies. Rather than protecting physical property or offering coverage for liability lawsuits, these policies provide safeguards against certain revenue drops. For businesses that suffer a covered drop in revenue, having business interruption coverage can be the difference between surviving the drop and going bankrupt.

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What Vermont Businesses Can Benefit from Business Income Insurance?

Many Vermont businesses can benefit from the protections that business income insurance provides, for few businesses would be able to survive a significant drop in revenue. A few examples of businesses that might need supplemental income for a time after a disaster include:

  • Restaurants, which might have a decrease in customer traffic following a disaster
  • Motels and hotels, which might go through a long rebuilding process following a disaster
  • Manufacturers, which might not have products to sell immediately following a disaster
  • Resorts, which might see visitors go to competing resort following a disaster

This is meant only as an illustrative list and is far from exhaustive. Any business that would struggle to pay salaries and bills following a disaster should consider getting a business income policy.

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What Risks Does Business Income Insurance Cover?

While every policy has its own terms and conditions, the perils that business income insurance policies cover are often similar to those that commercial property insurance policies protect against. Depending on a particular policy’s paperwork, this may include fire, vandalism, wind damage, hail damage, electrical surges, floods, earthquakes and many other perils.

Despite the many risks they do cover, there is a potential risk that the vast majority of business income policies don’t cover. These policies generally don’t protect businesses from poor leadership decisions. Errant decisions and unanticipated industry competition aren't uncontrollable disasters and thus, typically aren’t included in a policy’s coverages.

What Types of Business Income Insurance is Available?

There are several types of business income policies available. Three common options are:

  • Standard Business Interruption Coverage, which might provide benefits until a business’ operations resume
  • Extended Business Interruption Coverage, which might provide benefits for a set period after operations resume (e.g. 30 or 90 days)
  • Contingent Business Interruption Coverage, which might offer benefits if a key vendor or supplier experiences a covered disaster

Can Businesses Save Money by Self-Insuring Against Revenue Decreases?

Businesses that have the financial resources to self-insure against potential future revenue decreases certainly can avoid paying for business interruption coverage. Such a strategy, however, often doesn’t result in a net savings once opportunity costs are taken into account.

In order to self-insure against potential revenue decreases, businesses must keep a large stockpile of funds that can be readily accessed. This is money that’s not being put towards growing the business. In many cases, businesses are better off paying for a business interruption policy and using their financial resources to grow their operations.

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How Can Vermont Businesses Get Business Interruption Insurance?

Because business interruption insurance is such a unique form of coverage, Vermont businesses that want a policy should seek out an independent insurance agent who specializes in this form of insurance. Independent agents can explore policies from multiple insurers, and someone who’s familiar with this particular type of policy will know what to look for in policies’ terms and conditions.

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