It happened, a fire tore through your office and all that was left behind were embers and that yellow carpet you were thinking of replacing soon, anyway. There was so much that was coming up, you were getting the plans for the upcoming farmer’s market launch of your oat-based “milk” and smoked almond mini snack packs. The photo props, selfie cutouts for Instagram hash-tagging, and promotional products to be given in swag bags, they’re now those embers we mentioned before. How could this have happened? Could you have done something to shelter yourself a bit from the magnitude of this blow? Other than property insurance, of course.
Well, you could have ensured that you had some form of business continuity insurance, also known affectionately as business interruption insurance. Business interruption insurance helps replace the lost income and pay for extra expenses when a business is affected by a covered risk. Sometimes it’s called by its other nickname, business income coverage, typically it is part of a business owner’s policy (BOP). Covered risks generally include fire, theft, wind, falling objects, or lightning. I’m sure you’re wondering: What does this kind of insurance cover?
• Pre-loss earnings are the basis for reimbursement under business interruption coverage in your BOP.
• Lost earnings, typically defined as revenue.
• Cost of rent at a temporary location.
• Replacement of hardware, technology, and furniture.
• Leasing equipment.
• Paying employees overtime and hiring new employees, if necessary.
Okay, but how do I choose this sort of coverage?
Another great question! This sort of coverage typically has a coverage limit, or maximum amount your insurer will pay toward a claim. It’s vital to keep in mind that you choose coverage limits that are appropriate for your business.
Ask yourself key questions:
1. How long will it take to get our business back up and running after a catastrophe?
2. How well protected is our building? (If you rent)
3. Do we have a sprinkler system or fire alarms?
• Are they up-to-date and functional?
4. Is there a comparable space readily available to you in your immediate area?
• How quickly can it be up and running?
5. How long is your “restoration period”? (This is the time your policy will help pay for lost income and extra expenses)
As a business owner, you need to be sure to discuss the limitations of your business income interruption coverage with your insurer or insurance specialist, this way you fully understand your coverage, the limitations, and what to expect in case of the occurrence of a covered peril.
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