Could your business practices be stopped unexpectedly?
Have you ever heard of a business that suffered a loss causing it to completely shut down? Business Interruption Insurance is necessary for all businesses. This coverage pays for the lost income of your business when it’s destroyed by an insurance-sheltered catastrophe. Your policy can also pay for normal operating expenses that continue once your business comes to a halt, including rent, salaries, and a temporary operating location.
Consider those expenses that would be necessary for you to stay on track. Your business will likely lose more than just income if it shuts down and you are not prepared for the windfall. You could lose your clients and employees to your competitors, lose your suppliers because of default on contracts, and have to sell off inventory or business assets to recover from financial disaster. Getting your business back on track after a severe accident will be necessary for survival. While your business continues to grow, you should ask yourself, does my business have enough protection?
Key Coverage Areas
1. Business Interruption Coverage -
Income Replacement: Business interruption insurance covers the loss of income that a business would have earned if the interruption had not occurred. This coverage is essential for maintaining financial stability during periods when normal business operations are halted or significantly reduced due to damage from covered perils such as fire, storms, or other insured events.
Operating Expenses: In addition to lost income, this coverage helps pay for ongoing expenses that must be met even when the business is not fully operational, such as rent, utilities, payroll, and loan payments. This ensures that the business can meet its financial obligations during the recovery period.
Restoration Period: Coverage typically applies during the "restoration period," which is the time it takes to repair or restore the damaged property to its pre-loss condition. The duration of this period is defined in the policy and is critical for determining the extent of coverage.
2. Extra Expense Coverage -
Additional Costs to Minimize Downtime: Extra expense insurance covers the additional costs incurred by a business to avoid or minimize the length of business interruption. This might include expenses such as renting temporary office space, leasing equipment, or paying overtime to employees to get the business back up and running more quickly.
Relocation Costs: If the business needs to temporarily relocate to continue operations, extra expense coverage can help cover the costs associated with moving, setting up a temporary location, and restoring operations at the new site.
Expedited Repairs: Extra expense coverage may also include costs for expedited repairs, such as paying higher rates for rush services or materials, to speed up the restoration process and reduce the duration of the business interruption.
3. Contingent Business Interruption (CBI) Coverage -
Supply Chain Protection: Contingent business interruption coverage protects your business from income loss and extra expenses resulting from disruptions at the premises of your suppliers, customers, or other third-party entities upon which your operations depend. This coverage is crucial for businesses that rely heavily on specific suppliers or distributors.
Interruption Due to Key Clients or Suppliers: If a key client or supplier experiences a loss that affects your business operations, CBI can help cover the resulting financial impact on your business, ensuring continuity despite external disruptions.
4. Extended Business Interruption -
Protection Beyond Restoration: Extended business interruption coverage provides protection for income loss that continues after the physical property has been restored but before the business has fully returned to its pre-loss income levels. This additional coverage helps bridge the gap during the period it takes to regain customers, rebuild inventory, or ramp up production.
Are you properly covered?
Businesses of all types require property insurance, but not all policies provide coverage for the hazards that threaten your business specifically. Do you know if your current policy requires you to value your property with one of the above-mentioned valuation methods? In many cases, if your policy has a coverage limit that is less than 80% of the accurate value, you could receive far less than you would expect at the time of a loss (coinsurance clause).
As a prudent business owner, we welcome you to a personal consultation with one of our industry specialist insurance agents. Your agent will learn about your business, discuss your concerns, and identify the risks that could impact your business. Boynton Insurance Group will help guide you to an insurance carrier with a program specifically for your type of business, and an agent will help you customize your insurance coverage to best protect your company from major property loss and business interruption.
