09th February 2010
All You Need To Know About Business Interruption Insurance
Business interruption insurance is a policy that covers an owner of a business in case there is a major disaster at the business, (like fire or flood), that causes the business to stop work for a short amount of time.
Imagine this; you wake up at a two in the morning with a
phone call from your local fire department. Your building where your business
is run from has burned down. You have insurance to cover the building but what
are you going to do about your business loss? You cannot operate from a
building that is burned down and you cannot afford to relocate while the
building is being rebuilt. This is a situation that happens to many business
owners every day. Do not fret however, with a simple plan added to your already
existing coverage you will have everything you need to deal this situation and
many others like it.
Business interruption insurance is a policy that covers an
owner of a business in case there is a major disaster at the business, (like
fire or flood), that causes the business to stop work for a short amount of
time. Most often this type of insurance will take care of the profits that you
could have earned before your temporary interruption, the expenses that might
keep running tab even though you are not doing business, and a temporary
relocation of the business.
Many business owners do not take into account the need for
this type of insurance because it is not a major policy. It is one that has to
be added to an already existing policy, like one to cover fire damage to
property. It should be an essential part of the package though because it will
cover you if you cannot operate out of your building because of the
damage. In order to determine how much
coverage you will need you should do a work up of a business interruption
worksheet with an accountant. This will give you a roundabout number of how
much you need to cover your business for an extended amount of time in case of
a disaster. With these policies there is usually waiting period of two days
after the disaster before the coverage will kick in.
There are some things you should consider before you take
out a business interruption insurance policy. First, find out exactly what each
company’s policy offers. You should find out if the policy will cover things
like inventory and not just revenue. Compare the policy’s to find out what each
insurance company deems as an appropriate reason for you to be out of business;
remember it is the insurance company not you who gets to decide this so find
the one that works best for you. Also, you should be sure that the policy
covers many different aspects of disasters. For example, maybe your building
collapses due to unstable ground and your building did not meet the building
codes. This way no matter what the problem you business is covered.
Natural disasters like earthquakes and hurricanes happen all
the time and many buildings are damaged. Your building could also catch on fire
or have a major bust in a pipe that floods the whole business. In these
situations you will want to have an insurance that will cover your losses and
possible relocation if needed. Investing in business interruption insurance, as well as event cancellation insurance, is
a vital part of protecting your business.