If you are a fairly new business owner, you may not have business interruption insurance yet. Here are some things to know about getting proper business insurance for business interruption.
What Does it Do?
Business interruption insurance is designed to help you keep your business from a financial collapse in the case that it is temporarily interrupted. Many disasters can cause you to temporarily go out of business. It could be a literal disaster that destroys your storefront and causes you to close until you find another space. In the case of restaurants, it might be a subpar health inspection. Or it could be something that happens within the organizational structure of your company.
When you need to temporarily close, you may still have many expenses that are draining your finances. It's not like you would simply go under the radar for a few months. You may still have insurance to pay for, marketing campaigns that have already set up, inventory that goes bad during the time lapse, and certainly PR expenses to explain what's happening. In short, you aren't bringing in revenue, but you are spending a lot to keep your business afloat or pick the pieces back up.
Business interruption insurance comes in here. You may have property insurance to cover the rebuild of your property, for instance, but it's not going to replace the income that you are losing by not being open. That revenue stream may make the difference between a business that bounces back and one that loses its financial footing.
Who Is it For?
It is important to know how business insurance works so that you know if it's right for your business. An important point is that business insurance for interruptions will base its payouts on the amount of revenue that your business is already making. If your business is not revenue positive, this insurance won't be able to help. But for businesses that may experience a setback after they've already got their financial bearings, this insurance is an important safeguard.
How Can You Get it?
Business interruption insurance may fit within the umbrella of your current business insurance policy. Speak with your business insurance broker about adding this coverage or bundling it with your existing insurance policies. Your business and its finances will need to be evaluated to make sure that you are a good candidate for business interruption insurance.
Management accounting plays a big role in getting this critical business insurance coverage. The claims adjuster will need to see a steady positive income, and these weekly reports are a great way to show the trajectory of your business growth as well as a record of ongoing revenue.
To learn more about your options, contact services like Dale K. Cline, CPA PLLC.
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