Contingent business interruption is a form of small business insurance that provides financial assistance when the loss of a primary supplier, partner, or customer affects your ability to do business.
Contingent business interruption coverage can help your business if you lose significant revenue and are unable to continue to do business after a key supplier, business partner, or customer shuts down.
It’s a form of small business insurance that is typically added as a rider to a business interruption insurance policy. It provides cash to help you cover payroll, rent, and other expenses necessary to keep your business open.
Contingent business interruption insurance has wide applications in business. It’s not uncommon for a small business to rely heavily on a single or small number of suppliers, manufacturers, or customers. Consider the following examples of firms that could use this form of insurance:
In all of the above cases, the businesses were in the dangerous position of depending on a single manufacturer, supplier, customer, or business generator for their future survival. Each would benefit highly from purchasing contingent business interruption insurance.
Contingent business interruption insurance protects your business from disruptions that affect your supply chain or other businesses you rely on. However, as with business interruption insurance, the disruption must typically be related to physical damage or another commercial property insurance claim.
That means this policy will likely not cover losses related to the coronavirus. We encourage you to check with your insurance provider if you think you might be eligible for a claim.
Regular business interruption insurance coverage provides financial assistance for ongoing expenses when a fire, natural disaster, or other event disrupts your business. To qualify, the incident has to immediately affect your business.
Contingent business interruption kicks in when a supplier, business partner, or large customer has a problem. It pays for ongoing expenses while you search for a new supplier, partner, or major customer to restore lost sales.
In other words, it provides a stopgap while you look for a solution to keep your business open.
The answer depends on how reliant your business is on key vendors, business partners, or customers. If losing one will slash your revenue and threaten your survival, consult with a licensed agent about adding this form of protection.
Consider contingent business interruption insurance if:
In each of these examples, the future survival of your business is contingent on the continuing success of your suppliers, customers, or nearby business generators (also known as leader properties). Contingent business interruption insurance can provide funds to keep your business going in case any of these players run into trouble.
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