Can you explain what business insurance is and why I may need it?
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Asked January 31, 2014
Businesses face an additional risk that individuals do not face: they are subject to a loss of income if the business becomes whole or partially inoperable for a period of time. This risk could include the costs of setting up a temporary base of operations, replacing equipment, or even transferring you workload to subcontractors or other locations. Since so many businesses today are interlocked, depending on other businesses for supplies, tools, or equipment, a catastrophe at one company has the potential to create an income loss for many other companies.
Business income insurance is designed for the purpose of insuring businesses against potential losses. Like a homeowner's policy, the policy covers a large number of named perils and makes provisions for a wide range of causes that could result in a loss of income for your business. Unlike any individual policy, this type of coverage even includes peripheral losses that have an effect on your company but is not directly connected to it.
A Contingent Business Income insurance policy is similar to business income insurance, but applies to protecting your company from losses related to other companies being physically damaged and unable to meet the demand of your company. The purpose of such a policy is to minimize the economic impact that a major supplier would have if it was suddenly unable to meet the demand of the companies it supports.
The simple answer to whether or not you need business income insurance is a resounding "Yes." You are not required to carry this type of coverage under law, but not having it could mean going out of business when the policy could have kept your business afloat. For any company which relies on supplies, parts, or merchandise of another company, this is the best way to prevent, for example, a supplier's warehouse fire, from wreaking havoc in your own customer base, or a natural disaster from causing your company to cause the same problems for your own clients.
Answered January 31, 2014 by Anonymous