Why is business interruption insurance critical for SMEs?

Business interruption insurance is essential for small and medium-sized enterprises (SMEs) as it specifically provides compensation for lost income that a business would otherwise have earned during temporary shutdowns or operational downtimes. This type of insurance helps businesses recover financially from disruptions caused by various factors, such as natural disasters, fires, or other unforeseen events that can halt operations.

By covering lost income, business interruption insurance allows SMEs to maintain cash flow, pay ongoing expenses, and support their operations while they work towards resuming normal business activities. This support is crucial because, during a period of interruption, the business may still incur fixed costs, such as rent, salaries, and utility bills, despite not generating any revenue. Without this insurance, SMEs may struggle to survive financially in the aftermath of an incident that causes a disruption.

Other options focus on different aspects of business operations, such as coverage for debts, property loss, or employee health insurance, which do not address the core purpose of business interruption insurance—protecting income during periods when the business cannot operate.