Running your own business can be very challenging. There are many different factors contending for your constant attention. Generating revenue, planning the right marketing, and maintaining consistent customer and staff relations are among some of the challenges business owners face. And that’s on a good day.
Aside from the usual challenges, there are other unforeseen factors to consider as well. Aspects such as relocation, fire or water damage, or even natural catastrophes can seriously delay the success of a business. Fortunately, business interruption insurance can assist a business owner to remain afloat during an instance of a crisis.
Why Every Company Needs Business Interruption Insurance
On average, 70% of small businesses that fail after a catastrophic incident do so because they have an inadequate cover. If a company is underinsured, it will be difficult to remain afloat after a significant loss.
But what exactly does business insurance cover and how would it benefit your company? In these trying times, do you really need another insurance premium? Business interruption insurance is relatively self-explanatory. It covers your company’s day to day running expenses such as premises rental costs, lost revenue and employee wages.
Let’s have a look at a few of these insurance covers in more detail as well as what types of incidents they are most likely to cover.
Premises Rental Costs
A key factor in keeping your business running is the building from which your company operates. The last thing you need is to be evicted because the rental payments couldn’t be made. It’ll also be difficult to catch up on these outstanding payments once the situation is resolved.
There may also be a situation where the event in question has deemed your premises unusable. However, the rental agreement still requires monthly payments to be made. Business interruption insurance will ensure that your rental agreements or even mortgage payments aren’t compromised when your business is temporarily out of action.
Covering Employee Wages
When a business is unable to operate as normal, it has a devastating effect on the employees. Not being able to pay employees puts a lot of pressure on employers. It could result in staff leaving which means that once the business reopens, employers will have to begin the hiring and training process all over again.
This would set the business back even further. Business interruption insurance enables a business owner to meet payroll deadlines and eliminate the potential loss of staff. Not only will this give the employees peace of mind, but it’ll also restore employee faith in the company.
Maintaining Loan Payments
More often than not, a small business owner will have some sort of outstanding loan. There might not be a clause to cover the loss of business in the original loan agreement. If the loan is related to the business, it’ll have a negative effect if payments can’t be made on time.
As in the case of employee wages, business interruption insurance will make it possible for loan payments to be maintained.
Generally, sales revenue is every company’s main source of income. If a company can’t continue to generate income due to an unforeseen event, it puts a great amount of strain on the business. If the unforeseen event is something like a fire to the building it may be impossible to operate for a considerable amount of time.
With business interruption insurance the estimated amount of income your business could have generated is covered. This will give you time to do what’s necessary to get your business operational again.
The type of disaster you’re facing might render your original premises unusable. It might even become necessary to relocate your business to another premises to generate a sustainable income.
Ordinarily, relocating a business can be very costly and it’s something that’s usually planned and budgeted for well in advance. Fortunately, business interruption insurance will cover the expenses required to make this happen, even within a short period of time. In addition to covering the costs of a temporary location, this type of insurance will also include the actual moving costs.
In addition to premises rental, other overhead expenses such as utilities, water expenses, and communications are also covered by a comprehensive business interruption policy. This alleviates the pressure of getting everything paid up to date when the business is back in operation.
Potential Events that can be Covered
Several events can be covered by a business interruption claim. Some of the most common include:
- Natural disasters such as earthquakes, hurricanes or tornados
- Fire or water damage to the property or stock
- Supplier failures to provide original products
- Cyber incidents that compromise normal business operations
- Machinery breakdown in instances where this compromises the business
- Crime or vandalism to the property
Every company owner would be wise to invest in business interruption insurance. With natural disasters on the increase, an unfortunate event hampering business is more likely to happen. This insurance gives companies access to funds that will keep their businesses operational during difficult times.
The right insurance policy will mean your business can return to the same financial status it had before the incident. Create some peace of mind for the difficult times your company might face by investing in business interruption insurance today!