Business interruption insurance or business income coverage was formerly known as use and occupancy insurance (U&O). It's a sort of insurance that protects against the loss of use of machinery or property as a result of damage caused by a specific peril or hazard, such as a fire or natural catastrophe. It also protects you from losing money as a result of the situation. If the equipment or property could no longer be used, use and occupancy insurance provided coverage through endorsements to property and casualty insurance policies.
Occupancy and Use Insurance: What You Need to Know (U&O)
When a covered event renders the business location or equipment useless, use and occupancy insurance (U&O) reimburses the policyholder for lost business income. Fires, floods, storms, and other calamities that are specifically listed in the policy are examples of covered incidents. If a disaster or circumstance occurs that renders the business premises or equipment unusable, but the disaster is not covered by insurance, the insurance company will not compensate you for the lost revenue.
Use and occupancy insurance (U&O) can cover a certain amount of lost income that is written into the policy and estimated by the policyholder and the agent who sells the policy based on business income data. This type of policy can also pay the insured on a per-day basis, or a set, fixed sum, for each day the insured is unable to use or inhabit the covered property due to an insured risk.
Reviewing the business's prior financial records can help you figure out how much you owe. It is also possible to extend coverage when the place or equipment is declared useable again, but this must be specified in the policy.
Property vs. Use and Occupancy Insurance
Businesses and commercial locations both have use and occupancy insurance (often known as business interruption insurance) and property insurance. Property insurance, on the other hand, solely covers the tangible assets of the business, such as the building, grounds, equipment, supplies, and merchandise.
Business interruption insurance, on the other hand, covers the loss of income from a company's operations if it is forced to shut down due to property damage. In the event of a disaster, having business interruption insurance can help a company stay afloat by covering fixed expenditures like rent, power, and business licenses while the site and property are being repaired and restored.
In general, utilities, short interruptions (e.g., a power outage), and partial interruptions are not covered by business interruption insurance (e.g., scaled-back operations).
A restoration period is probably included in your business interruption insurance. The length of time that your policy helps pay for lost income and expenses while you rebuild your firm is known as a restoration period. Some policies will cover losses for up to 12 months, while others will cover losses for up to 18 or 24 months.
Insurance coverage for business disruption differs. Some insurance companies, for example, may pay for relocation costs, while others may not. To find out what your business interruption insurance coverage covers, contact your insurer.
How much does it set you back?
The cost of business interruption insurance is determined by your insurance agency, industry, staff count, and the amount of coverage you require.
Rates may also differ based on where you live and the level of risk you face. If your company is located in a region where natural catastrophes are more likely (e.g., hurricanes), you may have to pay more than companies in lower-risk areas.
Determine a financial figure for the coverage limit before investing in a business interruption policy by looking at items like profits for the next 12 to 24 months and related expenses (e.g., payroll and relocation costs). You'll be better prepared when discussing insurance alternatives with your provider if you do it this way.