While most businesses can benefit from getting business interruption insurance, there isn’t one type of coverage that’s right for every business. What business income insurance is best for your business depends on how your quickly your business could recover from a disaster and whether it’s reliant upon particular suppliers.
If your business can recover soon after repairs to any damaged property or equipment are made, then standard business interruption insurance may be sufficient. This type of coverage usually provides financial compensation for covered claims until operations resume. If revenue soon follows after operations resume, there may be little reason to have an additional protection.
For instance, standard business income insurance might be sufficient for a souvenir shop in a tourist area. Such a store likely gets most of its customers from passersby, and it probably doesn’t have many repeat customers. Should a disaster strike, the store should be able to get customers in the door as soon as the facilities have been repaired. Signs may be all that’s needed to draw tourists in.
Extended business income insurance normally continues to make payments for a specific amount of time after operations resume. A policy might, for example, continue making payments for one, two or three months after a business’ doors reopen.
While any business might benefit from having regular payments come in, this source of cash is especially helpful when it takes time to rebuild a business’ customer base. The payments can serve as a financial stop-gap while revenue slowly grows to pre-incident levels.
As an example, consider a restaurant that is on the outskirts of a small town and relies on a lot of regulars. Regular customers will probably return to the restaurant as soon as they hear that it’s reopened, but they might not hear about a reopening on the day that operations resume. It could take a few days, weeks or months for word to spread that a restaurant is up-and-running again. As patrons slowly find out and start coming in, the restaurateur can use insurance payments to cover their bills.
Extended business income insurance can also be helpful when businesses bill months out. Some businesses may serve customers immediately after reopening but not see any revenue for weeks or months. Insurance payments can provide cash to keep a business running during this time.
A dentist office is one business that may be in this situation. Dental practices sometimes don’t get paid for 30 days or more after they treat a patient, and the time period can be even longer if there’s a dental insurance issue. A practice might need business income insurance payments until patients’ payments start coming in.
Contingent business income coverage extends a policy’s protections to certain interruptions in suppliers’ or vendors’ operations. If a supplier or vendor suffers a covered incident that halts a business’ operations, this type of coverage might provide payments while the supplier recovers.
Contingent coverage is useful when a business is reliant on a particular supplier or vendor. Manufacturers who purchase specific parts from a supplier, for instance, might want the extra protection.
For help finding the business interruption insurance that’s right for your business, contact the independent insurance agents at World Insurance Associates. Our agents are well-versed in the different types of business interruption coverages that are available, and they can scour multiple insurers’ policies to help determine which one is best for your business’ situation.