Disasters strike every day, and while you can’t predict when they’ll occur you can prepare for them. One of the best ways to do this is by supplementing a comprehensive business continuity plan with Business Interruption Insurance. Having an understanding of how Business Interruption Insurance works and the benefits associated with it can help maximize the effectiveness of your business continuity plan.
Net Income vs. Revenue
A common misconception is that Business Interruption Insurance replaces revenue. It doesn’t. As a component of property coverage, it replaces net income derived from your company’s revenue while you’ve temporarily ceased operations because of a disaster. Once your business is up and running again, Business Interruption Insurance, for all intents and purposes, stops.
Extra Expense Insurance
Businesses face a whole host of extra expenses when a disaster strikes. For example, they might have to pay for a temporary office, business equipment or furniture during this time period. Extra Expense insurance can help ease the burden by covering the costs associated with these additional expenses.
Extended Period of Indemnity
Companies should also consider including an Extended Period of Indemnity in their Business Interruption Insurance policy because when your company resumes operations it may not be bringing in the same revenue and net income that it previously did. In other words, you can be operational but still suffering a loss from the disaster, so having an Extended Period of Indemnity can help make up the difference.
Business Interruption Insurance should be part of every business continuity plan, but knowing what your policy should and shouldn’t include depends on a variety of factors. This is why it’s important to work with an insurance broker who can help guide you through the process and make sure you’ve taken all of the necessary precautions to keep your business moving in the right direction.
Philadelphia, PA, 19102