Business interruption insurance is a form of insurance that compensates for the lost income a company suffers following a major disaster. The income lost may be because of natural disaster-related closure of the company’s facility or because of the reconstruction process following a natural disaster. Whatever the cause, losing income can be a devastating blow to any company. This is where business interruption insurance comes into play.
It aims to help businesses recover and cope up with any unforeseen circumstances that may lead to financial losses. Although there are a lot of factors that businesses have to consider when buying insurance coverage, determining the risks they need to face is one of the most important things to consider. Aside from natural risks, there are also other factors that business owners and managers should look at in identifying the insurance needs of their companies.
According to Insurance Research Institute, the key components of a standard business insurance coverage to protect businesses from losses such as those caused by liability and theft. Liability, as its name implies, refers to injuries and property losses that may occur as a result of a customer’s negligence. Other types of losses included in this category are advertising and legal fees. These are losses that typically arise from negligence, actions taken in bad faith, fraud or breach of contract by the insured party.
Because theft and injury cases are relatively common, small business owners should be aware of the types of coverage available to them. Businesses that provide products or services that are not closely connected to the operation of other companies should opt for a comprehensive type of insurance coverage. When it comes to theft, a policy that includes contents in its policy may be ideal. This means that the insured can protect his assets in case of damage or loss caused by fire, flooding, storm and even terrorist acts.
Another type of business insurance needs is product liability insurance. This protects businesses from liabilities arising from the use of their products or services. A number of states, for example, have a law that requires manufacturers to provide at least a certain amount of product liability insurance for customers. This requirement also applies to suppliers, who are required to make sure that their products are safe for use by buyers. Business owners can take advantage of this requirement by spreading the risk of potential losses among a number of suppliers rather than on just one supplier.
When it comes to protecting assets, businesses can also choose to go for business interruption insurance products. Businesses often encounter unexpected problems, such as damage to equipment or premises, that make running their operations impossible. When the damage is severe enough, some businesses even shut down. Installing and servicing damage control equipment can be very costly. Businesses need to ensure that they have adequate protection against such events.