When the wind blows, is it too late to look at your business interruption coverage?
If you live near the coast, you are well aware that when the wind blows, the disruption to your business may seem catastrophic. How can you rely on your insurance program to deal with the unpredictable financial disruption when your property is damaged from a storm event? What if the interruption is not because of a hurricane, but a tornado? Fire? Civil unrest or law enforcement?
Business Interruption coverage is defined as coverage for a loss resulting from the inability to put damaged property to its normal use. This type of coverage is also called “time element” insurance because the amount of loss depends on how long it takes to repair or replace the damaged property. The best known types of time element insurance are loss of business income and extra expense coverage. Loss of business income can be defined as the average monthly sales that are lost due to a covered business interruption. Extra expense is the cost to move essential operations to a temporary location in order for your business to operate during a covered loss.
When you are deciding how much insurance is necessary to cover your business to prevent financial ruin, there are five key questions you may want to consider:
- What are my expenses that must be paid whether or not my doors are open?
- What equipment is essential to running my operation, and how quickly can I replace it/them?
- Are there key employees that I want to retain while I am getting back up and running?
- Is there another location I can use to sustain production until the location is rebuilt?
- How long will it take to have my client base realize that we are open again?
During your annual renewal cycle you should pay attention to your time element or business interruption coverage. Please give us a call and we can help you do an audit of your current insurance program.