When a business is forced to shut down for something out of its control like a natural disaster, fire, or theft, the interruption to revenue can cause all sorts of financial issues and even lead to business closure. Thankfully, business interruption insurance can provide the means to pay your bills, including employee salaries, rent, and more even when you can’t operate as usual. Read the following to learn more about interruption insurance and how it could benefit your business:
Put simply, business interruption insurance is exactly what it sounds like, insurance that protects your business in the event that operating, as usual, is interrupted. The purpose of business interruption insurance is first and foremost to replace lost income if you are unable to operate your business due to a covered loss, like theft or fire. Just imagine how you would handle a tree falling onto your business, forcing you to close for a matter of time while the repairs are made. This type of policy could help you cover the loss of your income for the time you are closed due to repairs.
While all businesses, no matter their size, can benefit from business interruption insurance, some are in more need of this coverage than others. Keep in mind that business interruption policies typically include coverage limits, which is the maximum amount your insurance company would pay for any claim. Having a good coverage amount is essential as you will be responsible for any loss that exceeds that coverage limit.
This type of insurance coverage is especially helpful for businesses that rely on their physical facilities and assets, including machinery and equipment to generate revenue. Restaurants, retail stores, cosmetic salons, and more are good examples of the types of businesses that would be hard-pressed to get by if something happened to their physical location, interrupting business as usual.
You as a business owner are the expert in terms of whether your business could withstand a significant interruption or pause in your revenue generation. Answer the following questions, which will give you a good idea if you would benefit from this type of coverage:
If your operations are stopped for an extended period of time, the costs can be staggering. Consider not only the lost income but the cost of paying employees who are unable to work, damage to your business reputation in some cases, and even the expense of finding a temporary place to operate your business. All of this can lead to financial instability in even the most successful businesses.
In the event of a flood, fire, or other covered devastating perils, many businesses find themselves losing the property they have had permanently or having to rebuild. This can mean permanent closure for those who depended on their physical location to generate revenue.
There are many aspects to business interruption insurance coverage. The following are a few of the most commonly covered elements:
While business interruption coverage includes protection against many situations and provides compensation allowing you to keep your doors open after an interruption, it isn’t without some limits. The following are costs that aren’t covered under this type of policy:
The cost of business interruption insurance depends on factors like your industry, the number of employees you have, and the level of coverage you choose. It will also depend on your business location and claim risk that could affect your use of such coverage.
In the event of an unexpected and awful event, you will want to be prepared. Purchasing business interruption insurance could potentially protect your business, your employees, and even your financial future.