How to Limit Your Losses During a Business Interruption

From natural disasters to a global shutdown, we know the worst can – and does – happen sometimes. In today’s world we need to be prepared for just about anything.

Photo shows a group of professionals in a meeting, with one man standing up and pointing at a diagram on a flip chart, while the rest of the people sit around a conference table watching attentively.

Nonprofits experienced significant financial loss, layoffs, and closures as a result of the COVID-19 pandemic with a devastating impact in many cases. And while your next business interruption may not be pandemic related, an interruption of any kind can have a significant impact on an organization’s mission and services. While most organizations have general liability or commercial property insurance, it typically excludes loss from shutdowns or cancelled events related to a viral pandemic – another reason to consider business interruption insurance now.

As you know, business interruption coverage is a specialized form of insurance that covers lost income arising from the inability to continue normal operations and is generally offered as part of an organization’s existing property/casualty policy. It is also designed to cover losses as a result of physical property damage from events like fires, earthquakes, hurricanes and floods.

We know how devastating an interruption can be for nonprofits – particularly when there is still a great demand for the services they provide – both for the organization and for the populations they support. Just another reason why business interruption insurance is essential for protecting nonprofits against unexpected events and extreme crisis.

So how much business interruption coverage is enough?

First you need to consider the cost of coverage. Business interruption insurance can range from a few hundred to several thousand dollars per year, which can create a burden for fiscally conservative nonprofits.

Next, you should determine your level of coverage, start with the organization’s annual net income, compensation, employee benefits, and expenses. This will give you an idea of what it costs to sustain an operation’s revenue, salary, mortgage/rent and taxes in a given year. And remember, the longer the coverage, the higher the costs.

Ready to discuss business interruption coverage with your client?

At Convelo, we have decades of experience providing insurance for nonprofits and human services organizations and have deep knowledge of the complexities of insurance coverage for today’s organizations. Learn more about our capabilities and how we can help you grow your business, while protecting the vital work of your nonprofit and human service clients today.