After surveying hundreds of corporate risk managers, the Allianz Risk Barometer 2015 found that business interruption was the number one concern for companies, ranking ahead of cyber attacks, natural disasters, and fires, reports Claims Journal.
So, what is a business interruption? A business interruption can occur anytime a business is prevented from carrying out its normal operations. Business interruptions can be caused by…
- Fires and property damage that lead to extensive repairs.
- Supply chain interruptions.
- Outages in servers or information technology.
- DDoS attacks.
- Cloud outages.
During a business interruption, companies are forced to shut down temporarily for repairs or while they wait for part of their infrastructure to be restored. Because businesses now rely on servers and suppliers from around the world, a business interruption can happen suddenly and without warning.
Fortunately, small business insurance policies can include coverage for lost income you suffer as a result of a business interruption. But many small-business owners don't even realize that this coverage exists and that it can be included as part of a low-cost insurance package known as a Business Owner's Policy.
Insuring Your Business from Supply Chain and Business Interruptions
Imagine this: your IT company uses a data storage center located in Houston. A Gulf Coast hurricane knocks out power in its area, causing you to lose access to your data for a week. Your business could be miles away in New York or New Guinea, but an outage or cyber attack could have a cascading effect that knocks out a crucial part of your IT.
One of the most notorious tech outages occurred in 2011 when Sony's PlayStation Network went offline for nearly a month. Imagine that you were an indie game developer who had just released a title days before the outage. You'd be up Sony creek without a paddle.
Small tech companies don't have extra cash to make it through a month with no sales. During that time, you'd still have to pay…
- Rent.
- Employee payroll.
- Taxes.
Outages like this could force you into debt and lead some companies to file bankruptcy. So how do you insure against business interruptions?
Business Interruption Insurance can be added as a rider or endorsement to a BOP (Business Owner's Policy) or Property Insurance policy. Many small business owners buy BOPs because they bundle General Liability and Property Insurance and offer something of a "starter pack" of insurance.
However, you'll need to ask your insurance agent if your policy includes Business Interruption coverage. You'll want to double-check that you've got it and verify that it covers tech-related outages.
Business Interruption Insurance for Tech Companies and Their Clients
Depending on the type of IT work you do, it might be important to make sure your clients have Business Interruption coverage, too.
If your clients have concerns about outages and lost revenue as they're migrating to the cloud, you can recommend that they get Business Interruption coverage. If a cloud outage leads to a week of lost productivity, they can recoup their lost income.
It's always a good idea to talk with your insurance agent about IT insurance. Not all policies are designed for IT consultants and many won't cover IT-related outages. But when you work with TechInsurance, our agents will make sure you have coverage for these and other IT liabilities.
