Almost all businesses have key suppliers, which means they also have critical vulnerabilities specific to those supply chains. If one, or several, of your main suppliers or customers were unable to conduct business with you due to a fire, windstorm or other covered event, how bad would your financial losses be?
Standard business income interruption insurance reimburses revenues you lose while your company is unable to operate due to a covered event—usually direct physical damage to your property. However, this coverage does not protect against the loss of revenue caused by supply-chain breakdowns. For that, you would need contingent business interruption insurance.
This kind of policy can replace lost business income due to a supply-chain interruption, pay for extra expenses incurred to get a substitute for the lost supplier, and help with the costs of preventing further losses from the disruption. Often, physical damage to the supplier is not required. While this income protection may provide a vital lifeline, it is best complemented by ongoing and effective efforts to establish backup networks for crucial production inputs.