Do I need business interruption insurance?
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.
But too many small businessowners fail to think about
how they would manage if a fire or other disaster damaged
their business premises so that they were 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 may lose out to competitors.
A quick resumption of business after a disaster is
essential.
- 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 profits
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 many people
anticipate to get the business back on track. There
is generally a 48-hour waiting period before business
interruption coverage kicks in.
- The price of the policy is related to the risk
of a fire or other disaster damaging your premises.
All other things being equal, the price would probably
be higher for a restaurant than a real estate agency,
for example, because of the greater risk of fire.
Also, a real estate agency can more easily operate
out of another location.
Source: Insurance Information Institute
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