Business interruption insurance is a type of insurance that covers loss of income that a business may suffer after a disaster. Specifically, these policies cover some businesses that generate income due to its physical assets like machinery, land, even services. In the case of an interruption they will potentially lose income. While Business Property Insurance covers the value of most physical assets, it does not cover the loss of potential revenue. In some cases, this can lead to businesses losing so much income that they are forced to shut down. Both business who rely on income from selling physical products (such as wholesalers) and business who rely on foot traffic (retail stores, restaurants) need Business Income insurance.
Another factor a small businessperson needs to consider is Key Person Insurance. In a small business, the key person is usually the owner, the founders or perhaps a key employee or two. The primary factor to consider is if the person’s absence would be a detriment to the business on a substantial level. If this is the case, key person insurance is worth considering.
This is a life insurance policy that a business purchases on a key person’s life. The business is the beneficiary of the plan and pays the insurance policy premiums. In the case of a loss, the payout essentially buys the company time to find a new person or to implement other strategies to save the business.
If your small business is a partnership you may consider a Buy–Sell Agreement. This is a legally binding agreement between the co-owners of a business. It is sometimes referred to as a buyout agreement. A buy-sell agreement establishes criteria if a co-owner dies, is forced to leave the business, or simply chooses to leave the business. In this case, while not necessary this agreement can be funded by a life insurance policy. A buy/sell agreement gives employers peace of mind knowing that their business is in capable hands should they no longer be able or want to manage it.
A well-crafted, properly funded buy-sell agreement can offer you peace of mind that your business and family would be protected if something happened to one of your partners. If you think a buy-sell agreement could benefit you and your business, consult your financial professional to learn more about how to move forward and to coordinate with your attorney to draft the buy-sell agreement.