Reports from the Federal Emergency Management Agency (FEMA) indicate that more than 40% of small businesses permanently halt operations following a disaster. Businesses cannot survive without generating income. To ensure that your business stays safe the next time disaster strikes, we strongly encourage signing up for business interruption insurance if you do not already have one.
Having business insurance policies pay for lost income during covered crises can spell the difference between business continuity and bankruptcy. You can use these to cover daily expenses during the restoration period. However, note that no two policies have the same coverage and policy limits. You need to identify which plan addresses the risks that pose the biggest threat to your business.
Despite the benefits that business interruption insurance yields, the Insurance Information Institute indicates that only one-third of small businesses have one. Several issues can cause a business owner to forgo insurance, but for newbies, their lack of knowledge on the subject might make them feel unsure and hesitant.
As a way to encourage SMBs to insure their business, we have made a quick guide on the most important facts about business insurance.
Business interruption insurance compensates for lost income and covers operating expenses if you have to pause daily operations following natural disasters or fire. This policy covers mortgage or rent, utility bills, potential profit loss, employee payroll, and relocation fees.
Note that most policies do not cover property damage or business interruption losses stemming from a volcano eruption, an act of terrorism, an outbreak of infectious illnesses (e.g., COVID-19), a severe flood, or earthquake damage. However, you can get add-on insurance coverage for these circumstances.
To fully utilize your business insurance, invest in other policies that would help with post-disaster business continuity as well.
For example, commercial property insurance can cover the physical damage within your business premises, commercial crime insurance can protect you against fraudulent transactions, and worker's compensation can support employees during job-related accidents.
You can file claims faster and more efficiently if you familiarized yourself with these terms beforehand:
The market offers a wide selection of business insurance options. A seasoned business owner will find this convenient and exciting, but newbies might feel intimidated. Where do you even start looking? To help make insurance shopping more manageable, we have listed down some of the best insurance providers in the country. See which company might suit your needs and preferences.
Nationwide takes the number one spot on our list of top business interruption insurance providers. A business interruption insurance policy sets itself apart with its extensive, above-average coverage. Apart from the standard business interruption insurance coverage, such as business income, business property, and general liability, you can also file claims on business equipment damage.
Apart from their extensive business interruption coverage, clients can also rest easy knowing Nationwide stands as a reputable, highly sought-after insurer in America. More than 500,000 clients nationwide rely on them for business insurance. Plus, their century-long tenure serves as a testament to their financial stability.
For offices, firms, and agencies that offer professional services, consider getting your business interruption policy from Travelers. They are a reputable, financially stable insurance provider backed by more than a century of experience.
The company started as a travel accident insurance company—hence, their name. After a few decades, they expanded and began offering business interruption insurance products as they took on more clients.
We selected them as the ideal interruption insurance company for those that offer professional services because of their unique Business Income and Extra Expense (BIEE) coverage. Apart from the standard general liability, physical loss, or damage to property coverage, this feature also protects you from the loss of essential company records, including physical and digital data.
You can also add dependent property coverage to your contingent business interruption policy so you can file a claim in cases where your product supplier's absence affects operations. This add-on also covers business income loss in post-crisis situations wherein regular client/customer activity has not yet fully returned.
Although, note that Travelers does not provide business income insurance quotes online. Only certified agents can provide premium estimates.
Another solid, financially stable insurance company that provides extensive, customizable business interruption insurance policies is Farmers Insurance. As their name suggests, they initially offered insurance for ranchers and farmers during their founding years in the early 1920s. They pivoted to business insurance during the rise of retail businesses following World War II.
Farmers insurance sets itself apart through flexible business interruption policies. You can elect several add-ons called "endorsements" to customize your policy and provide coverage exceeding the standard post-disaster business interruption claims. Some endorsements even cover equipment and outdoor signage damage—which are both essential to retail businesses.
Assured Standard explains that businesses can protect themselves against several cyber threats by signing up for a cyber insurance policy. Check out our resources on calculating how much cyber insurance protection you need.
Business income coverage (BIC) is a commercial property insurance that covers the loss of profits suffered by a business when damage to their premises causes them to lose money. This type of policy ensures they have enough resources in order for them to keep supplying goods and services, or return what was lost due to an interruption with minimal losses.
Business interruption insurance doesn't cover broken items resulting from a covered event or loss. Flood and earthquake damage are not included in the policy, so you'll need to purchase those separately as well. Undocumented income that's not listed on your business' financial records is likewise excluded from coverage under this plan.
Business interruption insurance is not a legal requirement for any business. However, that doesn't mean you shouldn't be prepared. Insurance experts recommend looking at the risks your company encounters in order to determine the kind of insurance protection you need.
Small businesses will often purchase business interruption insurance by purchasing a business owner's policy (BOP), which bundles property and liability policies with the option of adding on an additional policy.
The most common documentation for proof of income includes documents such as pay stubs, bank statements, and last year's tax return.
Overall, the goal is to find a suitable insurance company that can provide you with a unique, customized policy matching your preferences and addressing the specific risks posing a threat to your company. You will not benefit from cookie-cutter programs.
We strongly urge business owners to go beyond the standard business interruption insurance coverage limits and see which add-ons would help with continuity during a crisis. Remember: every business has varying disaster-induced mitigation needs. Do not blindly sign up for the first thing your agent offers.
At Assured Standard, we help small business owners understand the value of getting insured and how these can benefit them in the long run. Check out our other guides on protecting against business income loss with insurance policies.