Most businesses rely on third parties to obtain (at least some) of their materials to have a completed product to sell. But what happens to the primary business when the products become difficult to get or there is a huge time delay? On almost every given day there is news of supply chain risks and how it is impacting businesses. Disruptions in the supply chain are ever present as you may hear of price increases in materials, long delays in transportation, lack of available workers, and other issues plaguing our business world and hence, our economy. Supply chain risks include loss of income for many businesses, especially manufacturers, but there are solutions.
Supply Versus Demand Issues
Businesses work to meet demands and strive to achieve that finished product, but when a key supplier can’t follow through in time to meet the demands, your business may be faced with loss of income and/or additional expenses. The good news is that insureds can purchase business income from dependent properties coverage. You may not have heard of this coverage but let’s take a look at what it can do for you and your business. The International Risk Management Institute (IRMI) states it as “property insurance that pays for the loss of income or increase in expenses resulting from damage…to the premises of another organization on which the insured depends, such as a key supplier or customer.”
Keep in mind that the insured must already have business income coverage; but this coverage would be extended, with an endorsement, to include losses happening to the key supplier and thus negatively impacting your business. In modern society, most businesses do rely on third party suppliers so in an effort to address that risk, you need to be prepared or you could be faced with financial devastation.
Suppose This Happens… Will Your Business be Prepared?
Imagine if you are a computer manufacturer and you rely on a third party to provide the motherboards. Assume a covered loss happens at the location of the supplier which leads to destruction of the motherboards. Now, you can’t output your computers and you will lose revenue, while being unable to meet customers’ demands. The dependent properties coverage will cover lost income in this situation. This coverage is very beneficial for any business depending on parts from third parties.
Let Us Assess and Address Your Supply Chain Risks Today!
We, at Burkett & Associates Insurance, understand the need to properly protect your business and we know that supply chain risks are prevalent right now. If you have any questions or need assistance in finding the right insurance protection you need, call our offices at 256-704-7400.