Whether you just started your small business or have been around for awhile, it’s a wise idea to evaluate the need for business interruption insurance. Too many small businesses have learned too late just how valuable this safeguard could have been.
There’s no doubt that your payroll, your cash flow, and your profitability are all driven by your continued ability to operate. What if that were suddenly stalled? In short, business interruption insurance is there to protect you against this risk. Business interruption insurance for your company can help you cover lost income when a covered loss occurs that puts your business on hold completely. Only this particular kind of coverage can step in to cover your lost revenue. Although property insurance may cover the damages to your physical property, any lost revenue due to the inability to operate can quickly destroy your business if you don’t have proper protection.
Here are the fast facts on business interruption insurance so that you can make an informed decision when purchasing coverage in NJ & PA.
- Business interruption insurance covers your lost profits, but it could also be used to protect your normal operating expenses like taxes, loans, or employee salaries (which still rack up when your business is closed)
- Usually, this insurance coverage will not pay utility costs. This is because utilities shouldn’t be necessary if you are unable to use your place of business. You could get a rider on your policy if you think that your temporary utility expenses might be higher while at the short-term rental location where you move operations.
- There’s usually a waiting period in the form of a “deductible”. For example, the event in question would have had to shut down your business for at least three days before you submit a claim.
- You could also get coverage for interruptions that impact your supplier, known as a Contingent Business Insurance Rider. If an event impacts the operational ability of your primary supplier, you might have to take the time to find someone else to meet your supply need. This might take weeks or months, so this kind of coverage can be invaluable the right circumstances are in place. If your company is heavily reliant on a supplier,
- Your coverage typically kicks in only when a covered event is the cause of the interruption. The events included in your policy may vary by the kind of coverage you select, so you need to read the fine print and get your questions answered upfront about any specific issues you may be concerned about. For example, one policy might cover severe snowfall, but another may not.
Even if you’re not sure whether a business interruption could stall your operations completely, it’s a good idea to have a plan in place. Be sure that you have critical business documents backed up electronically and stored in a safe separate physical location, if possible. Review your insurance needs annually and be sure that your coverage is growing alongside your business growth. Annual evaluations can provide highly beneficial in the event of a covered incident.