Most business owners would never consider opening a business without buying insurance to cover common perils such as fire, hail or theft. Some don't realize how difficult it can be to get their business back up and running after a catastrophic loss. A business that has to close down while the premises are being repaired may lose out to competitors, or lose a key employee that is vital to the business. Most business owners would agree, the faster you can get your business up and running, the better.
That is where business income comes in. It compensates you for lost income if your company has to vacate the premises due to disaster-related damage that is covered under your property insurance policy, such as a fire. It covers the profits you would have earned, based on your financial records, had the disaster not occurred. It also covers operating expenses, like rent or mortgage payments, that continue even though business activities have come to a temporary halt due to the loss. It also pays for extra expenses you incur to expedite recovery or continue operations, such as a move to a temporary location. One important thing to note is that in order for business income or business interruption insurance to kick in, the damage must be covered under a covered peril. See covered perils in your policy. If you're not sure, have your agent help you (or call us). For example, flood is most likely not a covered peril, so business income or business interruption is not going to kick in for damage caused by a flood.
Also, make sure the policy limits are sufficient to cover your company for more than a few days. Sometimes the policy will state a limit and other times it might state “actual loss sustained". After a major disaster, it can take more time than people anticipate getting the business back up and running, so making sure you look into your options can be vital. There is generally a 48-hour waiting period before business income insurance kicks in. Sometimes there are policy options available to change the waiting period. I have seen the waiting period anywhere from "no waiting period" to 72 hours. It really depends on the insurance carrier. If it is more than 72 hours, I would see if it's possible to change it. I'm sure it wouldn't cost that much to make this change.
Business income insurance or business interruption insurance is surprisingly affordable and is usually based on your gross sales. Studies have shown 40% of businesses don't reopen after a disaster, so having this coverage could be a game changer for your business. If you have questions about this coverage, please feel free to contact one of our licensed agents.