It might seem odd to insure your company’s income, since losses are a risk that comes with being in business, but it can be essential to your ongoing success under the right circumstances. The key is understanding what business income insurance protects, which allows you to better assess whether your company needs it. This insurance protects net income, so it doesn’t provide a buffer against losses caused by mismanagement or by the loss of clients. Instead, it protects against disruption that makes it impossible for your business to continue earning. A good example is when a company rents out its facilities to others, like a hotel or banquet hall does. If property damage makes it impossible to rent the property for a period, income is lost that has nothing to do with demand for goods or services.
Who Needs Income Insurance?
Companies that face a substantial risk of losses due to a shutdown that deprives the business of the opportunity to earn its income are the main audience for this product, including not only those who provide venues for clients but also those who could be shuttered by property damage to essential facilities or equipment. The income loss is covered during a prescribed restoration period, allowing you to get things in order and get those doors reopened. As a result, it’s a good idea for any company that could be closed down by too much damage to its headquarters or storefronts.