9 minute read
Running your own business requires patience and resilience, but both those things get tested when disaster strikes. Unexpected scenarios may force you to temporarily close up shop. A sudden fire at your business location could knock out your power, or vandals could damage your storefront, requiring extensive repairs. In scenarios like these, while your net income stream could stop, or be greatly reduced while you take care of repairs, your bills, payroll, and other ongoing business expenses would start to pile up quickly. Unfortunately, many businesses aren’t able to bounce back from situations like these; as many as 40% of businesses don’t recover after a disaster. Having business interruption insurance coverage can help you cover your bills and expenses when your business can’t generate income, helping you stay afloat when unexpected interruptions occur.
Business interruption insurance will help to pay for your loss of business income should you suffer a covered loss at your business location. If you suffer a loss and extensive repairs require you to close your business temporarily, you’ll lose out on crucial business income.
Business interruption insurance is designed to help you recover lost business income and ongoing business expenses while your business is temporarily closed.
The truth is, most small business should consider having this type of coverage. Unexpected losses can interrupt or stall your business at any given moment, draining you and your wallet. Unexpected losses can come in many forms. For some small business owners in Hamilton, Ontario, this recently came in the form of vandals causing an estimated $100,000 worth of damage to their business premises.
Damaged and destroyed property takes time to repair and replace. While these repairs are on the go, you still need to worry about ongoing and necessary expenses such as paying your employees, paying your bills to keep the lights on, and settling inventory payments, just to name a few. This is even more stressful when your business isn’t generating income.
If your business income has been interrupted or drastically reduced, ongoing business expenses can pile up like quicksand. Business interruption insurance can help you stay out of the quicksand.
Business interruption insurance can help protect your business in many ways. Whether you run a home-based business or have a shop, if your business needs to close because of an insured loss, business interruption insurance will help you cover your ongoing business expenses. Examples of these expenses may include:
- Rent, hydro, electricity, and other utilities
- Payroll for your employees
- Other expenses, such as alarm monitoring and property taxes
Essentially, this coverage replaces your lost net income while your business is closed so you can cover your ongoing business expenses.
If the property damage to your current business location is too extensive, it might make sense to spend money and move to a new location to keep your business running. Business interruption insurance may be able to help with some of these expenses as well.
Can other interruptions impact my business?
Even if your business doesn’t suffer an interruption from a loss at your business premises, other unexpected events could impact your ability to generate income. If a fire or other loss impacts one of your key suppliers, that in turn may also interrupt your business and negatively impact your business income as well. Contingent business interruption insurance can help with these types of situations.
The following are examples of contingent business interruption situations that can impact your business:
- One of your suppliers faces a fire. Running a business requires a lot of moving parts. Your business may have a supplier that provides you with raw materials or merchandise. If your supplier experiences a sudden fire and is unable to provide you with the supplies that your business needs, your sales may suffer.
- Your key client loses their roof. Oftentimes, your biggest customer is your favorite customer. If the bulk of your business’ sales are to one client or customer, you’re in a vulnerable position. If this key client suddenly experiences a collapsed roof, they may need to focus their funds on roof repairs. If they’re unable to purchase your goods or services, this could drastically reduce your sales and your ability to keep your business running.
- A neighboring business recovers from vandalism. It’s always great having friendly neighbors. It’s even better when their business attracts customers to your storefront. If a nearby department store falls victim to extreme vandalism and needs to shut down temporarily, this could adversely affect the sales of nearby small businesses, including yours.
Don’t let setbacks interrupt your business’ success.
You can’t always control what happens to your business, or the businesses around you. You can, however, control how prepared you are. Having the right protection in place can make a huge difference. Make sure your small business’ comeback is always stronger than its setback!
Think business interruption insurance coverage is what your small business needs?
More business insurance coverage options to consider:
Commercial general liability insurance: Commercial general liability (CGL) insurance is designed to protect you and your business from a loss if you’re found legally liable for bodily injuries or property damage to a third party caused by the product you sell or the service you provide. CGL insurance can also offer protection in situations where you or your employees are conducting business offsite.
Product liability insurance: Product liability insurance is often included in a CGL policy but not always. It’s important to double check that your small business insurance policy does protect you from risks associated with product liability claims.
Cyber risk and data breach coverage: Cyber attacks are an ongoing threat to small businesses and have continued to rise recently. Cyber event expense coverage is designed to help small businesses that rely on technology mitigate some of the expenses that may incur as a result of a cyber hack.
Professional liability: If one of your clients or customers claims your advice caused them a financial loss, your professional liability coverage can help you recover from the financial consequences that may incur. This coverage is also known as errors and omissions (E&O) coverage.
Property insurance: As a small business owner, you likely rely on your property, tools, equipment and technology to help keep your business running. If one of those key pieces of the puzzle was damaged and needed repair, you may not be able to continue operations. This is when you need property insurance coverage.
Equipment breakdown insurance: Your equipment is covered in your property insurance policy for damage caused by external sources, such as fire, floods and weather damage; however, you may not be covered for electrical or mechanical damage. In these situations, you’d look to your equipment breakdown insurance.
Commercial auto insurance: If you or your employees use your vehicle for business purposes you need commercial auto insurance to protect that vehicle in ways your personal auto policy may not be able to.