Every business suffers setbacks, but fortunately, we offer insurance for that! Above and beyond your basic property and liability coverages, there’s business interruption protection that’s made to maintain your revenue stream. If you’re not familiar with this plan, we’ll discuss a few of the basics today.
What’s the purpose of business interruption insurance?
As the name would imply, this coverage helps you bounce back from an event—beyond your control—that disrupts your daily operations. If there’s a fire at your office, for example, your property insurance would help to cover the loss of equipment and materials. It should also help you to rebuild/restock, but what happens in the meantime? When your workplace is destroyed will your employees still be able to work? If not, how will you continue to make money? Well, that’s where business interruption insurance comes into play.
Will it really cover my entire business income?
That’s the idea! When you need to use this insurance, your carrier will use your financial records to determine the difference that this disaster caused to your revenue stream. Then, they’ll help to make that up. They might even cover additional operating expenses, like your electricity, cable, security system(s), etc. that still have to be paid—even though you’re not utilizing these services temporarily. Of course, you’ll want to make sure you have a high enough limit to match your current cash flow. A policy with a lower maximum will be cheaper, and it could be sufficient for a company that’s just starting out. However, if you’re the owner of a multimillion-dollar company, then you’re going to want to ensure the limits are high enough to cover your costs of doing business for several days, weeks, or months. The longer the benefits are payable, the more you might pay in premium. But at least you know you’ll be able to recover from an interruption.
What about the extra expenses while we’re recovering?
Let’s assume you have your property insurance to help you pay for your physical damage and restoration. Plus, the business interruption to cover your regular revenue. Will you be able to pay for all the additional expenses required to stay open during this difficult time? Well, that depends. You might have to rent out another facility while yours is being repaired. Or subcontract some of the work you’re unable to complete on time thanks to the disruption. Either way, those are more hits to your income. For a few days, your savings could be sufficient. What happens, though, when those days stretch into weeks? Having an extra expense insurance policy could make the difference between shutting down completely and bouncing back from the brink of disaster. As long as these additional costs are reasonable, then this type of policy should cover them completely. Depending on the circumstances, you may be able to use this coverage without even activating your business interruption plan—or vice versa. So, it’s something to consider.
When you think about insuring your business, these probably aren’t the policies you had in mind. Still, business interruption insurance could make the difference between your company surviving a major setback or closing altogether. Don’t leave your income—and your employees’ incomes—vulnerable. Ask the experts at Freedom Insurance Agency how you can fully protect your business today!