The Difference Between Business Continuity and Insurance – Business Continuity 101

The Difference Between Business Continuity and Insurance – Business Continuity 101

In last week’s blog, we discussed why you should invest in a business continuity (BC) program. One point we made was that insurance against loss is typically not enough, so the additional value provided by a business continuity plan and program are needed. It’s important to know the differences between business continuity and insurance, and why insurance should be a part, but not the entirety of your business continuity plan.

The Difference Between Business Continuity and Insurance

Before we consider the differences, it is relevant to understand that business continuity is a form of insurance. The insurance we are comparing BC to is a contract of coverage where a party agrees to indemnify or reimburse another party for a defined loss under specific and defined conditions.


  • Provides financial coverage or reimbursement for a loss.
  • Defines conditions for where it will cover a loss.
  • Has defined actions required of the insured for coverage to be valid.
  • Can deny coverage if you do not meet conditions of the contract.
  • Requires multiple policy types due to exclusions in coverage.
  • Benefits are typically provided after the loss occurs and after the conditions of the policy are verified. This can be weeks after an event.
  • May not cover a loss not directly related to the event (i.e., decreased revenue loss due to reputational damage or lost customer base).
  • The financial loss may be greater than the coverage.
  • Does not prevent outages or impacts.

Business Continuity:

  • Your insurance policy may stipulate it as a  requirement.
  • Focuses on process or technology functionality to limit or prevent loss.
  • Focuses on limiting or preventing impacts of outages or emergencies.
  • Should include plans to limit or prevent reputational damage.
  • Focuses on organizational resiliency to keep an organization functioning.

Business Continuity and Insurance Work Together

The logic that BC is not needed because you have insurance is like a saying passengers don’t need seat belts or that you don’t need backup assist because you have liability insurance. Without a business continuity plan, you will have to identify any recovery actions and procedures ad hoc.  This means you’re more likely to miss important steps, overlook risks, and increase the impact of loss. Insurance coverage without a BC plan implies that your BC strategy is to hope an event does not occur. If an event does occur, you hope you can somehow figure out how to keep functioning or recover before the impact is so great that the business is not sustainable. Imagine yourself in an emergency: would you rather have a plan or have to figure it out as you go?  As we often say at MHA: “Hope is not a strategy.”

Insurance makes it easier. Insurance may allow you to have plans and strategies that are less complex or costly. Why? Depending on your risk and likelihood of occurrence, some costs or losses will be covered. This determination is a part of the risk analysis and a component of the strategy. On the other hand, the presence of a business continuity plan may result in a decrease in costs related to insurance premiums, providing real cost savings.

A well-structured insurance policy will help mitigate some of the financial loss in a disaster or emergency, but you cannot expect it to protect you from all eventualities. These include loss of reputation or long-term losses due you organization’s inability to recover or effectively perform in a timely fashion. In today’s “me first” environment, customers and vendors aren’t as understanding as you may think. Customers will simply wonder why your organization was not prepared.



“The Difference Between Business Continuity and Insurance” is part of our Business Continuity 101 series. We created the series for those new to BCM and those looking to improve their knowledge of the fundamentals of business continuity best practices. If you’re not sure where to start when it comes to BCM, we created this series for you. Read the previous post in the series: Why Organizations Invest in Business Continuity.

Richard Long is one of MHA’s practice team leaders for Technology and Disaster Recovery related engagements. He has been responsible for the successful execution of MHA business continuity and disaster recovery engagements in industries such as Energy & Utilities, Government Services, Healthcare, Insurance, Risk Management, Travel & Entertainment, Consumer Products, and Education. Prior to joining MHA, Richard held Senior IT Director positions at PetSmart (NASDAQ: PETM) and Avnet, Inc. (NYSE: AVT) and has been a senior leader across all disciplines of IT. He has successfully led international and domestic disaster recovery, technology assessment, crisis management and risk mitigation engagements.

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