Do I need business interruption insurance?
When you stop to think about it, business interruption coverage can be equally important as fire insurance. Most policies for business interruption are added to or included in your business owners or commercial package policy. Most business owners would never open a business without buying insurance to cover damage due to fire..but many small business owners forget about how they would manage if a fire or other disaster damaged their business premises so that they were temporarily unusable. What about if a government regulator forced you to close for some other reason? Perhaps a health concern?
A business that has to close down completely while repairs are being made or cleared by health officials may lose out to competitors. Quick return to "business as usual" after a disaster is critical.
The Insurance Information Institute offers the following definitions and information regarding business interruption insurance:
1) Business interruption insurance compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. Business interruption insurance covers the revenue you would have earned, based on your financial records, had the disaster not occurred. The policy also covers operating expenses, like electricity, that continue even though business activities have come to a temporary halt.
2) Make sure the policy limits are sufficient to cover your company for more than a few days. After a major disaster, it can take more time than many people anticipate to get the business back on track. There is generally a 48-hour waiting period before business interruption coverage kicks in.
3) The price of the policy is related to the risk of a fire or other disaster damaging your premises. All other things being equal, the price would probably be higher for a restaurant than a real estate agency, for example, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.
If you are a hospital, school, hotel, theater, restaurant, transportation company there is new Ebola specific coverage on a per day basis for business interruption or interference in the event a regulator closes your place of business.
Don't forget about Extra Expense Insurance.
Extra Expense Insurance reimburses your company for a reasonable sum of money that it spends, over and above normal operating expenses, to avoid having to shut down during the restoration period. Usually extra expenses will be paid if they help to decrease business interruption costs. In some instances, extra expense insurance alone may provide sufficient coverage, without the purchase of business interruption insurance.
Lastly, read through your policy carefully or contact us or your agent to help you determine if your business owners policy has business interruption and/or extra expense coverage and what types of events will trigger this coverage. In most cases coverage only applies at the premises if there is direct physical damage. In the event of regulator forcing shut down, because of Ebola exposure for example you may need a specific endorsement or policy for that.
Please feel free to contact us with questions or for more information.