Business interruption insurance covers the loss of income that a business suffers in the unfortunate event that the business can’t continue trading after an insured claim. The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after an unforeseen loss.
There are a number of factors that determine whether or not a business requires business interruption insurance, but above all else, it comes down to whether or not substantial damage inflicted on the business’ property or physical assets would affect its ability to trade for any sustained period of time.
For example, in the event of a flood, a sole trader who relies only on a laptop and an internet connection to work would have little trouble finding a replacement machine and a temporary premises from which to operate. However, at the other end of a scale, a large business that holds a lot of stock or equipment would be more exposed should its assets be damaged or destroyed.
The onus is on the business owner to assess the risks, and consider whether a large scale disaster would affect its ability to trade. If the answer is “no”, then it is unlikely a business interruption policy will be necessary. However if the answer is “yes” then it’s likely that the business needs protecting with business interruption insurance.