Can your business survive without a regular stream of income—say if a fire, hurricane, theft or other catastrophe damaged your facility and brought your operations to a halt? These catastrophes do happen from time to time so it’s a good idea to arm yourself with the right type of insurance.
Most businesses have insurance to cover their buildings and other physical property, but they need to go a step further to really get the full protection they need. “Business income” or “business interruption” insurance will cover a company’s ongoing expenses if operations are suspended for a covered reason, resulting in sharply decreased income. Business income insurance covers your net income and continuing normal operating expenses —in addition to necessary extra expenses that may result from the catastrophe, such as temporary relocation or rental costs. Any damage to the facility itself is covered separately by your property insurance.
Business income insurance is also a “must have” if your business depends on the continuing operation of another business to survive—say, a key supplier of goods, a major customer or an anchor store in a shopping mall where you are located. Collectively, these businesses are known as dependent properties because your income stream could be significantly reduced by the shutdown or significant disruption of another’s operations that you depend on. The last thing you want is for you to lose income due to the loss or damage to a dependent property that is out of your control.
One thing to remember when considering business income insurance is that if a qualifying event forces your business to close down operations temporarily, you will still be responsible for covering continuing normal operating expenses—which may include employee payroll, rent, mortgage interest payments, insurance, property tax and utilities. Business income insurance would not only help you meet these obligations, but also cover any extra expenses that help you avoid or minimize down time and expedite the repair or replacement of damaged property.
Finding the Right Coverage
Keep in mind that business income and interruption coverage can differ widely among carriers, depending on the options that are available so be sure to research your options and consult with your independent agent for advice. Here are some questions to consider in selecting the right coverage options for your business:
- How susceptible is your business to loss from fire, windstorm; and other perils?
- How replaceable is your inventory?
- How long would it take to get your business up-and-running again after a loss?
- How available are comparable buildings and equipment if relocation is necessary?
- Will your workforce still be available to you if you need to release and then rehire them?
- How long would it take to build your business back up to normal following a temporary closure?
- How would business income coverage dovetail with your existing property coverage?
- What are reasonable coverage amounts to obtain ?
For more information about business income insurance, contact Atlas Insurance at (808) 533-3222.