Business interruption insurance is one of the most valuable coverages available, but it is often overlooked by small business owners. Most businesses purchase property insurance to cover repairs for fires and other disasters. But what happens when a disaster occurs and there is no business income during the restoration and repair phase while money cannot be generated? The loss of income haunts many business owners while working to recover from a natural disaster. According to the Institute for Business and Home Safety, one in four businesses that close due to unforeseeable events remains closed, and small businesses are the most affected because they tend to operate under tighter margins.
To get business interruption insurance, consider the following:
Your business may be at risk when those businesses you depend on are affected by a disaster. An explosion at a key supplier may mean that you no longer have cost-effective access to raw materials, which can hurt your ability to deliver your product. This can impact your income even though your facilities may not be physically damaged. Additional coverage called “contingent business” insurance covers lost profits in these indirect disaster scenarios.
For reimbursement, the best information you can provide the insurer is extensive and detailed documentation of lost profits. Remember to save the back-up of your electronic records off-site so that you can provide proof of your losses if your facilities are destroyed.
Answering these questions can help you plan for the unexpected:
Your insurance agent can inform you what types of coverages are available and how they work together. Take the time to review your current policy and seriously consider adding business interruption insurance or revisiting your current coverage limits.