Do I Need Business Interruption Coverage?

It is normal human tendency to really not think of the possibility of things going wrong, especially when everything is hail and hearty. People like to refrain from paranoid behaviour, so that they can enjoy their present and also not get tagged as a ‘psycho’ or a ‘freak’ by others. When it comes to business though, it is vital to have such foresight because it can affect how you survive when facing disastrous situations. This, precisely, is why having business insurance is so important. Of all possible things that can go wrong, the ones that are truly beyond control are the acts of nature such as a flood or a storm; of course, several man-made events such as a riot, an act of terrorism, or a fire breakout can also cause untold or irreparable damages at times.

Business interruption insurance provides for protection against damages caused to businesses by such disasters. The entire purpose of such insurance for business is to cover the loss of income the business sustains, either because it has been closed due to the disaster or because it was rebuilt following the damage caused by the disaster.

I Already Have Property Insurance

Most small businesses take out property insurance policies to protect their business against damage. Having this does not preclude the need for business interruption insurance, though. The important point of difference is the different areas that these forms of small business insurance cover. A property insurance policy can provide protection against the loss from physical damage of any sort to the business; the business interruption policy will provide additional cover for the profits the business expected to make during the duration when it was forced to stay inoperative.

A major act of terrorism that targets the area where your business is located may result in damage to your property and put you temporarily out of business; or there may be a robbery attempt or a fire that destroyed your business premises. Along with this, there is also the possibility of an unexpected breakdown of computer systems that governed your equipment operation. The property insurance policy may cover the damages and could be more than enough at times. However, there could be times when you need to have business interruption insurance to tide you over the period until you get back to business as usual.

What Business Interruption Policies Cover

Although specifics may vary depending on the insurance company providing the cover, the general terms of small business insurance coverage include two key factors primarily:

• Payment of an amount of money that reflects the difference between what you expected to earn and what you actually earn in the period following the unforeseen event.

• Payment of up to 30 percent of the insured sum to help you make temporary arrangements to get your business up and running at the earliest.

Business owners may anticipate some forms of risk such as injury to their employees or visitors to their business premises, and they may, as a result, look for public liability insurance quotes. They may be wary of lawsuits from disgruntled clients and take professional indemnity insurance to ensure they do not sustain huge losses. Along with these forms of business insurance, it is also vital for businesses to be prepared to face unforeseen events, such as the Icelandic ash cloud that occurred in 2010 or the riots of 2011 that emanated in different parts of England.

Whether you purchase online business insurance or visit a broker who provides business insurance policies, it is vital to have a business interruption policy that covers unexpected events which have the potential of temporarily halting your business operations.

Cormac Reynolds writes for UK insurance company Axa. He has written articles for the insurance industry for three years

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