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Rent and Wages Under Business Interruption Insurance: What’s Covered?

By Darragh Timlin on April 23rd, 2024

Business interruption insurance provides vital protection for companies facing unexpected halts to operations, covering income losses plus ongoing expenses until activity resumes. But what exactly is covered under standard policies when it comes to major costs like rent payments and employee wages? Brisco Business examines typical coverage.

How Business Interruption Insurance Cover Works

If disasters or damage suspend trading, this specialised insurance provides an indemnity, replacing profits during the interruption until operations normalise, known as the indemnity period. 

Insurance policies cover the provable income a business would have earned had no financial loss occurred, averting complete financial collapse. Premiums and coverage limits depend on annual revenues and risk factors.

Business interruption insurance can also cover regular operating expenses accruing even while closed, like rent, loans, taxes and payroll. By covering unavoidable costs, companies have the means to reopen afterwards instead of shuttering permanently due to the pressures of fixed overhead combined with no income.

Rent Payments Coverage

While exact policy specifics differ across insurers, standard business interruption coverage responds to property lease or mortgage payments for premises made unusable by insured incidents for tenants and owners alike. This grants vital breathing room despite losing anticipated sales revenue.

Even if companies relocate staff to alternate sites, having headquarters and warehouses remain contracted without early termination fees maintains asset control until reconstruction allows returning in the future.

Insurers can cover full rent costs for the damaged property itself during repairs, plus supplementary expenses related to temporary relocations if required. 

Employee Wages and Payroll Coverage

Employee payroll liabilities present some of the largest recurring financial pressures facing interrupted businesses, alongside rent. Salaried staff expect continued payment, irrespective of company conditions.

Letting go of skilled workers due to cash flow issues often severely hampers recovery prospects down the line. This makes maintaining payroll vital.

Business interruption insurance can help companies retain talent through suspensions by covering some portion of payroll expenses as part of extra expenses or fixed costs. However, directors’ salaries or partner drawings may get excluded depending on the policy type.

While full wages help employees enormously, partial coverage still assists in avoiding payroll cuts or redundancies while managing reductions where absolutely necessary. 

Other Interruption Costs Potentially Covered 

In addition to rent and employee wages, business interruption insurance policies may cover various other ongoing expenses that continue even when a company’s operations are suspended. These can include:

  • Utility bills for electricity, water and  gas
  • Loan or mortgage repayments on business property and equipment
  • Tax liabilities, like corporation tax, that remain due
  • Licence and permit fees to remain compliant with regulations

Essentially, most fixed overhead costs not directly tied to production or sales may be claimable under business interruption cover. When arranging a policy, it’s important to prioritise coverage for your largest expenses first, such as payroll and rent, which often represent the most significant cash flow burdens during an interruption. 

After securing protection for these major costs, review your other regular operational expenses with your insurance provider. Discuss which of these overheads are essential to your business continuity and would strain your finances if a disaster temporarily halted your revenue. This allows you to tailor your business interruption policy to your company’s unique cost structure and coverage priorities.

Get Business Interruption Insurance with Brisco Business

Business interruption insurance serves as a vital safety net, ensuring your company can withstand unexpected closures and emerge ready to resume normal operations. By providing financial assistance for lost income, plus ongoing expenses like rent and employee wages, this coverage keeps your business afloat until you can welcome back customers.

Get in Contact Today

Don’t leave your company’s future to chance. Get a quote from the experts at Brisco Business today to create a business interruption policy tailored to your unique needs and budget. With the right coverage in place, you can face whatever challenges come your way with confidence, knowing that you have the support you need to weather the storm and emerge stronger on the other side.

Darragh Timlin

With over 25 years’ experience, Darragh is an expert in all things insurance. Starting his career in commercial property underwriting, Darragh has worked for a number of global insurers and is now Managing Director of Brisco Business, part of the wider Henry Seymour Group.

All articles by Darragh Timlin

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