If your small business operations were interrupted next week, would you be able to bounce back the week after next? For 9 out of 10 small businesses, the answer is no.
According to FEMA, being forced to close for just five days can cause the majority of small businesses to fail within a year. But if your business were to face a serious interruption—due to fire, flood, break-in or natural disaster—it could be weeks or months before things were back to normal.
Interruptions like these pose a significant risk to today’s small businesses, which is why many businesses manage that risk by purchasing Business Interruption Insurance coverage.
What Is Business Interruption Insurance?
Business Interruption Insurance is a type of coverage that protects your business from a loss of income caused by a partial or complete interruption in normal business operations. It can help you replace lost income, cover payroll and pay bills in the event of a serious interruption.
This type of coverage can often fill an important gap between what is and isn’t covered by your property insurance. A business that experiences a loss covered by their property insurance policy may still be forced to close for repairs or relocation.
Common Interruptions to Business Operations
- Burst pipes
- Leaking rooftop water tanks
- Structural damage
- Natural disasters
It could take weeks or months to recover from losses such as a burst pipe, significant property damage, hurricane or serious fire. Specialized machinery may also take time to replace. In the meantime, the rent, bills, utilities, taxes and payroll will still need to be paid, or you risk losing key staff and valuable customers.
While it’s the role of property insurance to help replace what was damaged or lost in such cases, businesses also need the addition coverage of a business interruption policy to handle their continuing expenses.
How Does Business Interruption Insurance Work?
Typically, business interruption works in conjunction with your property insurance coverage. After a business has experienced a loss and filed a claim against their property insurance, business interruption coverage can be used to cover financial losses that are a direct result of the interruption. Typically, the specific amount and duration of coverage benefits can be customized to fit the needs of your business, with additional coverage options available in some cases.
While it’s true that some businesses can weather a few days or even a few weeks of unordinary operations, most small businesses can’t. If your business is one of the 9 in 10 business that would face significant challenges from an unplanned interruption, you need Business Interruption Insurance.