Any business can suffer downtime in a disaster, which can stop the flow of money. One way to protect your business from a financial shutdown is to get unique business insurance that covers lost revenue and wages. Here’s a look at business interruption insurance and how it can help your firm avoid a financial crisis.
What Happens When You Cannot Open Your Business?
Shutting down a business can happen for numerous reasons, from lack of funds or demand to vandalism, theft, or a natural disaster such as fire or flooding. A company can shut down for several weeks until normal conditions are restored.
When you are forced to close your business for a peril mentioned in a business insurance coverage policy, the insurer pays the money you could have earned. It will only cover listed risks and not every disaster that leads to closure. Natural disasters such as severe storms are usually covered perils, but each policy has its specific wording. Your business interruption insurance can pay for relocation during downtime.
How It Helps You Cover Employee Wages
Business interruption insurance pays for employee wages based on your average costs. This coverage is beneficial if your business plans to stay closed for a lengthy period. You’ll be able to hang on to the same team if you pay them during this downtime. With this insurance, you might be able to get a reliable team for a while.
The coverage does have its limits. If you are using it to pay for relocation, it indicates you have the means to continue the operation. So it won’t cover employee wages for those who work at the alternate location during downtime. But it may protect those not working during this period, depending on the insurer.
Do You Have the Right Coverage?
Even though business interruption coverage is among the most valuable types of coverage a business can carry, not all insurance companies offer it. Many insurers design versions of this concept that pays businesses for specific scenarios when income comes to a grinding halt.
You must remember that certain businesses have more risks than others, as insurance companies base their policies on these risks. Natural disasters are the most typical perils that insurers deal with in terms of perils offset by financial protection.
An insurer is more likely to provide interruption coverage for a natural disaster than a financial problem caused by a wrong management decision. In that case, you would need professional liability coverage. The type of business coverage you get should depend on the risks of loss that the company realistically faces.
If your company is located in a zone where there’s constant construction, it could affect your business for a day or two. However, operating in a flood zone requires special flood coverage, just as working in an earthquake zone requires separate earthquake coverage.
Protect Your Business from Loss
Consider business insurance coverage to ensure that your company continues to have access to the cash it needs during a crisis. Contact us at Family Financial Insurance Group for more information on protecting your business from a disaster.