The Benefits of Business Interruption Insurance
Conducting business around the globe brings the risk of being affected by natural disasters such as earthquakes, tsunamis and hurricanes, along with other catastrophes including fires and flooding.
In 2015, natural disasters included an earthquake in Chile that led to 1 million people being evacuated from their homes; an earthquake in Nepal that killed about 8,000 people; and a typhoon that evacuated 700,000 people in the Philippines.
When an international organization operates in some of the world’s highest-risk countries, there is a distinct possibility that it will have to temporarily close operations because of those sorts of events. Additionally, because those countries don’t always have the resources needed to repair damages, and get an operation running again quickly, closures can last longer than in more advanced countries.
The Cost of Business Interruption
It’s clear that the effects of business interruption are being felt. Clements Worldwide Risk Index includes a survey of managers working for companies with far-flung operations about distance management and business interruption. Twenty-nine percent of managers surveyed said their biggest losses abroad were the result of business interruptions, but just 25 percent said they were prepared for such events.
That’s where business interruption insurance comes in. It reimburses revenues a business loses when it cannot operate after a disaster. Standard business interruption insurance business is done as a component of property insurance and business owners insurance.
“Business interruption insurance could be a key component to your company’s survival in the event of a natural disaster or other catastrophe,” says Clements Pete James, sales executive for Global Organizations. “As the world changes and businesses become more global, companies need to consider their insurance options and how to best protect their investments and their employees. Business interruption insurance can mitigate losses by compensating for lost income and, in some instances, when purchased, employee wages in the event work cannot be performed because of a disaster.”
Dollars and Sense
The cost of the policy will depend on various factors, such as location, and the type of business you’re running. For example, a telesales can establish a temporary office, and get back to work, easier than a manufacturing plant can. Additional coverage is also available that pays for the cost of special actions to get your business up and running after an interruption, such as renting temporary office space in another location, leasing temporary equipment or outsourcing your customer service operations during the repair period.
When designed appropriately, business interruption can cover fixed expenses such as salaries, rent, and health care costs that need to be paid even when a company isn’t making money. It also covers relocation expenses and possibly incidental costs that come with closing relocating and reopening an operation.
Business Interruption insurance is also not just for commercial enterprises. NGOs and humanitarian organizations also can benefit. What if a natural disaster or political violence prevents operations and a grant is suspended. Business Interruption insurance can compensate for this lost revenue and pay salaries of staff that may have to wait to resume operations.
Get Insured, and Keep on Working
Business interruption insurance can cover organizations around the globe to maintain their operations. It can also be paired with war and terrorism (i.e. political violence coverage) to cover acts of civil disobedience or terrorism that effect an organization’s operations.
You can control the cost of business interruption insurance because you control the waiting period before benefits take affect and the length of time your business will be covered. Many business managers underestimate the time required to get a business back up and running. By determining how long you would expect to be shut down after a disaster, and the revenue you will lose during the shut-down, an expert from Clements can work with you to create a policy that suits your needs and fits your budget.
Call us today at +1.202.872.0060 or 800.872.0067 or e-mail email@example.com to discuss how we can tailor our policy to meet the size and scope of your organization.