Business owners and executives often have to make difficult choices about harm reduction and risk mitigation. They need to address likely risks for the organization while simultaneously keeping costs to operate the company low. Professionals often have to balance the likely need for certain types of insurance coverage with the cost of a policy. One type of insurance that many professionals overlook is business interruption insurance coverage.
While most companies never need business interruption insurance coverage, those that do may find it invaluable during times of economic hardship.
How does business interruption insurance work?
Business interruption insurance is a type of coverage that helps pay operational expenses while a company cannot operate. Typically, the business has to face factors outside of the control of executives or ownership for such coverage to be available. A natural disaster might result in the long-term closure of nearby roads. That may force a retail establishment to close indefinitely. Business interruption insurance can help cover fixed operational expenses until the company either closes down for good or can finally reopen.
What does business interruption insurance cover?
Technically, every business interruption policy is unique. Organizations typically outline the costs they want to cover in the policy, and the insurance company may impose either a set amount of coverage for those losses or a specific duration of time when the policy can pay those expenses. Business interruption insurance can cover mortgage payments or costs for rental space. The policy can pay for employee wages when a company has salaried employees. It can even cover the cost of their benefit packages. Reviewing policy documents to ensure proper coverage for likely expenses is an important part of securing business interruption insurance coverage.
Given how expensive a business interruption policy claim can be for an insurance company, businesses often face a complex claims process. They likely need to have thorough documentation of the issue that caused the interruption and proof of the expenses that the policy should help cover. Those starting businesses, moving into a different position at an organization or reviewing current company protections may need support as they evaluate their current coverage for obvious gaps. Business interruption insurance can be very useful for some organizations and might potentially be a waste of capital for others.
Exploring company exposure and different forms of insurance coverage can help owners and executives determine what forms of support they require for the protection of the organization, its investors and its employees. Reaching out to the team at Goodkin APC can help businesses evaluate their insurance options and current policies accordingly.