Does your commercial policy cover the interruption of business income during a loss? With the history of South Florida and hurricanes, you may want to consider adding this very important but often misunderstood policy to your business insurance package. Business interruption insurance should be considered as vital as fire, theft, and Workmen’s Compensation. Business interruption policies cover profits, fixed costs such as rent and utilities, temporary locations, extra expenses incurred such as for advertising, civil authority and ingress/egress coverage.
Given the rise in natural disasters, no matter to what factors one may attribute them, it is undeniable that fires, floods, hurricanes and other catastrophic weather events have severe impacts on businesses and their ability to operate. Business policies generally only cover loss or damage to equipment, inventory, and your place of business. They do not cover income lost if you cannot operate your business if, as a for instance, there is a category five hurricane heading for Fort Lauderdale and civil authorities have instituted a mandatory evacuation and you must close. These policies also do not provide for the losses while you’re out of the area, or the ongoing losses u the evacuation order is lifted and returned to the area to assess the damage.
What It Does and Doesn’t Do
As with all insurance policies, business interruption insurance can be very specific. For instance, after super storm Sandy, some local Connecticut businesses found out that downed power lines that left them in the dark for weeks were not covered by business interruption policies. Unless the policy specifically states that it will cover downed power lines, you will need to purchase a rider for just such a possibility. An experienced insurance agent can help you formulate a policy that will cover the most likely eventualities.
Coverage generally has a limit of 3 to 6 months from the time of the loss and continuing until such time as the business returns to its pre-loss state. If a business has a long production lead time, the business owner will need to negotiate a longer period of coverage. For instance, if an orange grower sees his trees wiped out by hurricane or tornado, he will need to negotiate a period that will cover him until more trees can be planted and grow into production capacity. A restaurant or retail shop would need to negotiate a much shorter period, simply because they do not have a longer production lead time.
First thing to understand is that business interruption insurance is not a standalone policy. This is a policy commonly issued as part of a Business Owners Policy or Commercial Package Policy that may or may not include property insurance. You will need to actively document your profits for a period of months leading up your application. Your insurance agent can let you know the types of documentation you will need, and helped put together an end to end insurance policy that will not only help to keep you afloat, but to ride out the storm.