What Types of Businesses is Business Income Insurance For?

Any business that would struggle to remain financially viable if there was a temporary decrease in revenue ought to consider getting business income insurance. When a disaster strikes, revenue may come to a halt -- but bills won’t. Even if suppliers and employees are understanding, there will be a limit to how long they’ll wait for payment. Not being able to pay bills for just a short time could force a business to permanently close its doors.

Just a few examples of businesses that may need business income coverage include:

• Restaurants, which may need coverage beyond when they reopen after a disaster so they can continue paying bills until business picks back up
• Hotels, which might need coverage for several months while rebuilding after a major disaster
• Manufacturers, which may have to front the cost of assembling products after a disaster until the products are finished and can be sold

Do Businesses That Have Cash Reserves Need a Business Interruption Policy?

Businesses that have significant savings may want to self-insure against potential decreases in revenue instead of buying a business interruption policy. This obviously helps a business save money since it doesn’t have to pay a policy’s premiums. There is a cost associated with self-insuring, though.

Self-insuring against revenue decreases requires keeping a lot of funds in a readily accessible account. These funds are capital that can’t be used to grow a business, because they must be saved for a potential disaster.

By purchasing a business interruption policy, which itself is usually quite affordable, a business can free up the funds that would otherwise have to be saved. These funds can be invested in upgrading a business’ facilities, purchasing goods at volume for discounts, breaking into new markets, or any number of other purposes. Often, using this money to grow a business is more effective than saving it just in case something happens. Getting a business interruption policy lets a business do this without being exposed to unnecessary risk.

How Can Businesses Get Business Interruption Insurance?

For help finding business interruption insurance, business owners should contact an independent insurance agent who specializes in commercial insurance. Business income coverage is often available as a stand-alone protection, through a business owner’s policy or as part of a commercial package policy. A knowledgeable independent agent can help determine which of these options is best for a particular business.