Don’t Think it Can’t Happen
Remember Superstorm Sandy? Imagine a fire to a neighboring business which spreads to your location, damaging your inventory, shutting down your production line – and at its worst – requiring you to close your business. How will you replace your earnings while you relocate your office, rebuild your inventory, and restore your business operations?
According to the Insurance Institute of Business and Home at least 25% of businesses that close due to a disaster do not reopen. Don’t let your business be one of them. That’s why Butwin Insurance Group suggests that you consider business interruption insurance (also known as business income insurance) as one way to proactively protect your business in case of a disaster or other loss.
What Business Interruption Insurance Typically Covers
Business Interruption Insurance is typically sold as an add on to property and casualty insurance and is used to replace lost or reduced income or profitability after a covered loss, so your company can get back on its feet again.
Your pre-loss earnings are the basis for reimbursement under business interruption coverage. Lost earnings are typically defined as revenues minus ongoing expenses. That could include merchandise that was destroyed prior to shipping, to help you get some of that lost income back or any extra expenses to keep your business running because of the loss. This includes, for example, the difference in costs for utilities based upon a new, temporary location.
Time is also a factor. How long would you expect you will to need to restore your business after a loss? This “restoration period” determines how much profit you might lose and can vary greatly depending on the severity of the loss your business experiences.
Determining Your Coverage Needs
A small manufacturer will likely require different coverage than a retail operation. Here are a few things we will consider, when determining your needs:
- How likely is it that you will experience a covered loss?
- How long would it take to get your business back up and running?
- If you rent, how well protected is your building?
- Are sprinkler systems up to date and functional?
- Do you have access to comparable commercial space in the case of a business interruption?