Business Interruption Insurance is an insurance policy that covers the loss of income a business may experience due to disaster or major unforeseen events. Put simply, it’s designed to protect you from serious setbacks and potentially snowballing problems.
But before signing anything, let’s discuss the three things business owners may overlook or underestimate when considering their insurance. Ask yourself, and carefully consider your answers to these questions:
1. What Exactly Is The Policy Going To Cover?
While most Business Interruption Insurance policies cover similar generic areas, just assuming you’re all-set can have detrimental consequences. Commonly covered financial attributes can include:
- Any profits that your business otherwise would have taken.
- Fixed operational expenses – (in terms of property costs).
- Relocation costs.
- Training or education costs for new employees.
- Other expenses – covering extra costs within reason of the operation.
- Circumstantial closure of business – enforcement is usually government-related.
This list is merely a guide as policy inclusions and exclusions can vary dramatically. Also take into consideration that cover will be based on prior or historical figures.
2. How Do I Accurately Calculate My Indemnity Period?
Firstly, what is an indemnity period?
This is the estimated time period you believe is required to re-establish your business to operating at full capacity. From your insurer’s perspective, this is the time period for which you’ll receive cover. Among every insurance-related measure, this is probably the most significant component to action. Some aspects not to forget are:
- Seasonal considerations
- Equipment repair – ordering, delivery lead times for spare/new parts.
- Building/property repair
This could even cause additional prolonged financial issues if not initially estimated correctly. Thorough calculation must be undertaken to ensure absolutely every expense possible is covered for your estimated time period.
Depending on the specifics and nature of your business, a wise suggestion would be to add on 10-20% more time than you originally account for.
3. Can You Really Afford Not To Have It?
Even if you require only minor recovery, clients may direct their loyalty to competitors depending on what business you’re in. The situations that surround insurance claims are normally circumstantial, however, potentially losing a customer or two could be the least of your problems in the event of a disaster.
Business Interruption Insurance is undoubtedly a requirement for just about any business. There have been an abundance of cases where businesses have unfortunately collapsed on themselves due to either naivety, (thinking it won’t happen to them), or underestimation. The common denominators that apply to this question’s contrary are:
How much are you prepared to lose? And;
What is your strategy for income replacement?
Obviously nobody wants to pay unnecessary premiums, but in today’s unpredictable business world, it’s recommended to be safe than sorry. Business Interruption Insurance is not to be taken lightly. Speak to an insurance broker at PSC Direct for more information.