Every Business Owner Needs This Type of Insurance

Image source: Getty Images

Business owners who don’t have this type of insurance are taking a huge risk. 

Key points

• Business owners need to protect their financial security, which means buying the right kinds of insurance coverage.
• Business owners need insurance others don’t, including business interruption insurance.
• This type of insurance will cover you if you’re unable to operate your business due to a covered loss, like a fire at your location. 

Business owners are responsible for their own financial security much more than someone who collects a paycheck from an employer. If a small business has employees, the company owner may also be indirectly responsible for other families’ financial stability as well. 

Because of the responsibility they have taken on, business owners need to make sure they have the right kinds of insurance coverage to protect their own finances and the company’s future. There’s some specific types of insurance business owners need that most people don’t. 

In fact, there’s one kind of coverage just about everyone who owns a company needs to have. 

Don’t go without this insurance if you’re a business owner 

If you are running a business, it is very important to make sure you have business interruption insurance. Also referred to as business income insurance or contingent business interruption insurance, this kind of policy provides protection in the event a company is temporarily unable to open its doors as a result of a covered loss.

For example, if a business sustained damage to its headquarters as a result of a fire, the fire would obviously be covered. But the company would need more than just a payout to replace equipment and the structure damaged by the fire. The business would likely not be able to open its doors for a while during the rebuilding process, so it would not earn income during that time.

Business interruption insurance would cover the losses that result from the interruption of normal business operations due to the covered loss. For example, the policy might pay for:

• Missed revenue the company does not earn if it is forced to close. 
• Payroll for employees who cannot work due to the interruption of normal business operations.
• Other operating expenses such as a mortgage or lease payment and taxes that the business cannot pay due to the interruption of income.
• Relocation costs if the business needs to move to a different location temporarily.
• Training costs if employees need to be trained on different protocols or procedures due to the temporary interruption of normal business operations. 

The exact specifics of what a policy covers will depend on the terms of the insurance contract, but these are common losses most business owners can expect to be compensated for if they have the right business interruption insurance policy in place before disaster strikes. 

Why is business interruption insurance so important

Every business owner needs business interruption insurance because there is no way to tell if and when a covered disaster will occur. There are many different types of events that could result in a company being forced to suspend operations temporarily with no warning. 

And, without business interruption insurance, if any one of those events occurred, the company could end up going out of business permanently because it could not sustain itself during the rebuilding process.

No company owner wants to see that happen to the business they worked so hard to build, so entrepreneurs should make sure they have the right business interruption insurance coverage in place before disaster strikes.