Business interruption insurance can be as vital to your survival as a business as fire insurance. Most people would never consider opening a business without buying insurance to cover damage due to fire and windstorms. Too often small business owners don’t think about how they would manage if a fire or other disaster damaged their business premises to the point of being temporarily unusable. Business interruption coverage is not sold separately. It is added to a property insurance policy or included in a package policy.
A business that has to close down completely while the premises are being repaired runs the risk of losing out to competitors. A quick resumption of business after a disaster is essential.
If a major event or disaster occurs, sometimes your business cannot operate or will be forced to operate below full capacity. Not only will this result in a loss in profit, but you will still have to pay regular costs like rent, salaries and utilities. In some cases, renovation and re-building work may even have to be done before your business is back to normal.
Business interruption insurance helps pay ongoing costs while you rebuild. It can help you retain key staff during an interruption, and can cover you if there’s an increased cost involved in resuming your business operations at an alternative location.
Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than you may think to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
It’s impossible to predict the future, but if you make sure you have the right coverage to protect your business against interruption and loss, you can ensure that your business has a safe and secure future.