According to recent reports, less than 40% of SMEs have business interruption insurance. And the same reports depicts that 23% of the SMEs had never even heard about this type of business insurance.
Are you one among the latter case? Confused whether you need a business interruption insurance or not? Let’s understand the fundamental aspects of this insurance so that you can make a wise decision for your business.
What is Business Interruption Insurance?
It is a type of business insurance that covers the loss of income that a business may experience after a natural disaster. It is necessary as much as fire insurance. But because of lack of knowledge, companies often ignore it.
What does Business Interruption Insurance Cover?
- The Operating Expenses: Even if your business is temporarily closed due to a disaster or calamity, it covers your employees’ salaries during this period in order to avoid any interruption.
- Business Profits: The profits that you would have gained if the incident did not happen.
- Taxes: Businesses cannot ignore or neglect taxes. Regardless of the disaster, you need to pay taxes. Business Interruption Insurance can help you to pay tax on time.
- Rent or Lease Payments: Even if your premises are unstable or affected by a disaster, many leases still require the renter to continue making payments. You need to have your own insurance since most of the renters may not consider the landlord’s insurance.
- Relocation: The total expenses of moving your business to a temporary location.
- Mortgage Payments: Loan payments are often scheduled monthly. This corporate insurance cover can assist you to make those payments in case your business is not working and generating any income.
Are Business Interruption Insurance & Property Insurance Same?
No, they both are different. Property insurance covers the physical damage caused to the business. While the business interruption insurance covers the profits that you might have earned if the casualty hadn’t happened.
All in all, with this type of business insurance, you can be in the same financial position as if the loss wouldn’t have occurred.
Note: If your Property Insurance policy does not cover an event or disaster (e.g., a flood) and keeps your business from operating, in this case, business interruption coverage cannot help. To cover your interim expenses, you need to have flood insurance as a part of your property insurance. It would cover all the water damages as well.
Recommended Read: Can A Water Damaged Home Be Saved?
Is it possible to buy Business Interruption Insurance without any other policy?
Business Interruption Insurance is a stand-alone policy. You can add it on to your business ‘Property Insurance Cover’, or can buy a comprehensive package policy that various policy companies offer. You can include it as a part of the business primary policy. Moreover, it only pays out if the main policy covers the cause of the loss.
The above discussed are the main queries that every business owner has while purchasing business interruption insurance. There are many factors you need to weigh while buying business insurance. In fact, you can customize the coverage options according to your company’s needs and choose wisely.
Small business owners who are aware of their insurance policies have high-chances of receiving coverage when they need to file a claim.
Want to know more about business interruption policy? Discuss the business coverage’s that are most relevant and appropriate for your business with Dry Effect team!