Why Do You Need Business Continuation Insurance?


Bryan Huynh

- Updated February 23, 2024

Why Do You Need Business Continuation Insurance?

Business continuation insurance is a type of business insurance helps companies replace income and other financial losses that stem from temporary disruptions to operations. Understanding why this type of business insurance is crucial to help you determine if you need it. Even if your company has the strongest risk management policies, many disasters do not abide by the rules. Companies that are fortified against losses can pick themselves up better and quicker.

This article explores why you need business continuation insurance and why you might not. You should not let your company’s fate be decided by a random act of nature. Take charge of your company’s future and find out if you need business continuation insurance.


Why do you need business continuation insurance?

To protect against financial loss

The purpose of all types of insurance is to protect against risks that could cause financial losses. Business continuation insurance is no different. Despite a company’s best efforts to plan for the unexpected, a truly unforeseen event could occur that devastates the company’s regular operations. Plus, a company’s plan to deal with a disaster could fall apart if the disaster exceeds expectations and strikes at a stronger magnitude. There are no certainties when forming contingency plans. Business continuation insurance can help companies minimize financial impacts.

Companies still incur expenses in the wake of an unexpected event. Operating costs must still be paid regardless if they can do business or not. Landlords want their rent. Utility companies want what is due to them. Vendors want to get paid. Companies can file a business continuation insurance claim to help cover expenses like:

  • Lost revenue a company would have normally made if it was open.
  • Mortgage, rent, and lease payments for a company’s regular physical business space.
  • Loan payments that a company needed to pay during the business disruption.
  • Taxes.
  • Employee payroll.
  • Relocation expenses in the event a company must move to another location because of physical damages.
  • Extra expenses like renting a temporary location.

Business continuation insurance can help companies continue business as usual during disruptive circumstances.

To maintain customer relationships

Loyal customers can be extremely valuable to companies. Each time a customer makes a repeat purchase with a particular company, they are showing that they trust the company enough to keep doing business with them. Keeping current customers satisfied is an obvious goal for many companies to generate repeatable revenue with minimal effort. It has been often reported that it costs a company more to obtain customers than to retain existing ones. Companies that rise to the challenge of attracting and keeping customers are capable of building the loyalty that drives sustainable revenue.

Then a disaster happens.

A company can not serve its loyal customers. Perhaps the physical location is damaged. Perhaps products were not delivered to a sudden supply chain issue. Whatever the reason, a company’s inability to operate normally can cause customer frustration which can lead to customers going elsewhere to get what they need. A company’s reputation is on the line every single day. How they rebound after a significant business disruption can play a role in maintaining their bonds with their loyal customers. Prospective customers can also take notice of a company’s post-disruption performance and decide to do business with them.

Business continuation insurance can help companies continue operating to meet their customers’ needs, maintaining loyalty along the way.

To meet contractual obligations

Contracts are a constant in business. It is rare to not find one in any company’s file cabinet. For instance, construction firms often require the contractors they hire to possess their own liability insurance or errors and omissions insurance. These firms require the contractors to submit certificates of insurance as proof of coverage. These requests are often written into the contracts between the firms and contractors. If contractors do not comply, the firms that hired them could let them go due to breach of contract. Some firms will not even let contractors bid on a project unless they submit a certificate of insurance. Contracts help keep companies free from risks. They also help ensure relevant parties are properly and timely repaid.

Although some companies might be understanding during a crisis, others might not be. They want the other side of their contracts to be upheld no matter what. This can create a tremendous strain on a company that must deal with business property loss and other factors that interrupt their normal operations. Business continuation insurance can help companies fulfill their ends of the contracts. Additionally, some contracts require this type of insurance to ensure successful completion.

Contracts are critical to many companies. Business continuation insurance can help companies fulfill their obligations. However acts of crimes are not covered by business continuation insurance, they are covered by business crime insurance.

To protect against unexpected events

Financial losses aside, disasters and unexpected events can pose existential threats to companies and their employees. What if a disaster strikes? What if our office is destroyed? What if our inventory is ruined? How will we serve our customers? How will we earn a living?

Disasters can not be prevented. Companies can erect safeguards against their ill effects, but they can not stop crises from happening. The best companies can do is protect themselves as much as they can before the unfortunate takes place. Preparedness and response plans as well as insurance can reassure companies, their employees, and their customers that business as usual is within reach. This reassurance can help people deal with the crises they themselves face. Many disasters and other unexpected events affect more than a company’s bottom line. Employees are people and as such, they might contend with the loss of life and personal property during a disaster. Giving them some level of comfort that their jobs are secure can help them get through a difficult period. Not that they would look forward to returning to work after losing everything they own, but employees can rest easier knowing that is a valid option.

Business continuation insurance can provide companies and their employees with peace of mind.


What are examples of business continuation claims?

Natural disasters

Nearly every spot on the planet is vulnerable to some sort of natural disaster. Florida is prone to experiencing hurricanes and floods. California is prone to dealing with earthquakes. Companies must establish themselves somewhere. They can not worry about setting up shop in a flood zone or earthquake country. Business continuation insurance can alleviate their fears of the worst situations coming true. Companies can file a business continuation claim if they can not operate because of a natural disaster. A flood damaged all of a store’s inventory. An earthquake wrecked a company’s home office. Business continuation insurance can help companies get through these tough times if they own the proper coverage.


Fires have become a growing source of concern in this country. Wildfires have lived up to their names, sparking death, destruction, and chaos in seconds. Their increasing numbers have made them an act of nature that few people want to deal with. Companies doing business in areas rich with fire histories have to protect themselves against the eventuality that they may fall victim to the nightmare. The best storm preparedness plan can not stop a fire from ravaging a storefront or headquarters. Companies can file a business continuation insurance claim if they must temporarily close due to a devastating fire and they would file a business property claim on the damages to the property.

Power outages

Power outages can occur during and even after a disaster. They can also happen without a disaster in sight. Government-mandated power outages could be essential during planned construction projects. Their planned nature does not make them any easier to get through. Many companies, if not all, rely on electricity in their regular operations. Power outages can cause companies to close. Companies left in the dark can file a business continuation claim if they find themselves unable to operate due to circumstances out of their control. In addition to covering lost revenue, this type of insurance can help companies cover relocation costs if an outage lasts for an extended time.


The COVID-19 public health emergency threw the entire world into turmoil. Many companies had to adapt to a brand-new world. Those that did not probably could not because they were closed because their employees were too sick to come to work. A company can file a business continuation claim if it is temporarily closed because of a pandemic. However, many insurance providers do not cover pandemics. Policyholders should consult their policies to determine if they possess this type of coverage. If they do not, then they can contact their insurance provider to discuss appropriate options. With pandemics now a real threat, providers might extend their coverage terms accordingly.

Supply chain disruptions

Supply chain disruptions were other unforeseen events brought to light during the COVID-19 public health emergency. Goods can not reach their destinations if there are no delivery drivers to transport them. Grocery shortages affect more than people’s well-being. They can cause stores to lose revenue and close. Supply chain disruptions caused by pandemics, labor strikes, and more can force companies to go out of business. Companies can file a business continuation claim if a supply chain disruption causes it to temporarily close. This type of insurance can hopefully help affected companies get past this hurdle so they can pick up where they left off once the transportation lines run smoothly again.


When do you not need business continuation insurance?

Discovering how business continuation insurance can save your company from ruin amid a significant interruption can bring you one step closer to choosing the right policy to align with your company’s risks. However, not every company needs business continuation insurance. Why should you pay for insurance that you will never need to use?

You can help your company save money by only purchasing insurance that would benefit your company. For example, if you do not use any vehicles during the regular operations of your company, then you probably would not need commercial auto insurance. Another example involves product liability insurance. You probably would not need this type of insurance if you do not manufacture, distribute, or sell any goods. Owning any policy that does not pertain to your business can cost you money.

You might not need business continuation insurance if your business:

  • is a sole proprietorship or partnership and has no employees or physical premises.
  • operates entirely online and does not have any physical premises.
  • is a corporation or limited liability company (LLC) and has no employees or physical premises.

Forgoing business continuation insurance does not mean you should not own any business insurance. A basic Business Owner’s Policy (BOP) that contains the minimum coverage your company can get by on can be the difference between your company’s continued success and its closure.

If you do not know what coverage to get or if business continuation insurance is right for you, then you should contact an insurance agent or broker. Researching business insurance on your own can only take you so far. Discussing your situation with an expert can help you get the right coverage to help ensure your growth.



The world is a scary place. Misfortune can strike at any moment. Even with ample warning, events once thought benign can plow through the entrepreneurial dreams of the most spirited of business leaders. Business continuation insurance can help companies continue in the face of adversity, providing comfort to stakeholders, employees, and customers in this volatile world.

About The Author

Bryan Huynh

Bryan Huynh

Product Tester & Writer

Bryan Huynh is a dedicated Product Tester & Writer. Just as insurance has your back, Bryan works to review and inform you about the wide range of insurance products available, ranging from business, auto, health, home, pet, to life insurance.

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