Getting an edge over your competitors in today’s competitive business world is paramount. You always need to think long-term, and one way to do that is to make sure you’re insured.
Whether you want to have your house, car or life covered, you do it because you never want your hard work going to waste. It is no different when you’re running a business. Since many companies are competing against one another – especially in some congested industries – business interruption insurance has become more important than ever.
The world today has seen a rise and fall of many businesses, no matter what industry or level of competitiveness is involved. There are so many variables that determine success, that you have to always have a back-up plan.
An interruption insurance is a lifeline. Do you need it?
What is Business Interruption Insurance?
Often also called business income insurance, business interruption insurance is a coverage option for companies, big or small, that pays out if they make a loss. This loss of revenue can be as a result of physical damages to your company’s property, equipment, machinery or vehicles.
Essentially, the cover includes the payments of expenses that a company wouldn’t be able to pay due to the physical losses they suffered. These losses would have ‘interrupted’ their performance and as a result, they would need subsequent cover.
This can include, but not be limited to, payments such as:
- Lease payments
- Pay-roll costs
- Building utilities such as electricity and water
- Other general insurance policies
It is almost termed as a life insurance for businesses, because it covers long-term costs after damage was made. Read on as we discuss the reasons why this insurance is so vital.
Why Do You need Business Interruption Insurance?
Supports You for Lost Revenue
Obviously, business interruption insurance aids you when you’ve lost revenue after suffering physical damages. This cover essentially prevents your business from shutting down permanently.
If your equipment, for example, breaks down you can make a claim for the lost profits that came as a result of the damage. You can also make a claim for the damaged equipment and then continue operating. This type of support is essential because it prevents your company from facing liquidation. Instead, you’ll have a minor setback that just needs to be managed.
Helps You Keep Your Premises
Along with continuing to run your business, you need an office or commercial property from which to operate. If your business suffers losses and you’re unable to pay your lease or rental expenses, your operations can suffer drastically.
When your business doesn’t have a ‘home’ it can prove to be detrimental in the long-run. You’ll have no place to conduct your work, hold meetings with stakeholders or simply have a ‘face’ for your company’s brand or image.
Fortunately, with business interruption insurance you can use a part of the claim to pay your rental or lease expenses. This will help you avoid relocating, which can accrue even more costs.
Moreover, in the more severe cases – where excessive damage were to force you to move or relocate – you can utilise commercial property insurance to cover you as well.
Helps Keep Employees Compensated
In the event that a disaster has struck your business in such a way that your employees can’t continue their work, this insurance can cover their wages. Even if the company isn’t making money, you can still look after your team while you get your company back on track.
The cover ensures your staff will remain on your payroll and help to keep their loyalty, instead of them leaving and finding work elsewhere. This is important because if you lose your employees on top of all your other setbacks, it could prevent you from ever recovering.
Re-appointing new staff, managing staff turnover and implementing more training can accrue more unwanted costs you simply aren’t able to pay while rebuilding the company. This proves the value of securing your workers’ income with insurance cover.
Protects You from Being Blacklisted
If your business was started using a business loan, this insurance will prevent you from defaulting on your committed loan. Not being able to pay your installments can damage your credit score and accrue excess costs such as additional interest and other penalties.
A business interruption loan will allow you to cover most – if not all – of your loan repayments, thereby preventing you from being blacklisted.
You always need to have back-up plans when you run or own a business. You need to have yourself, your staff and the well-being of your company protected from unexpected tragedies.
If your business goes under, all your hard work would have been for nothing, your employees could lose their livelihoods and you, as the owner, would shoulder much of the blame. To avoid this, get the necessary cover sorted as soon as possible.