Business Interruption Insurance
Hi, I’m Jerry Becerra with Barbary Insurance Brokerage, and today we’re going try and make business interruption insurance easy. Business interruption coverage replaces your lost income and covers your extra expenses at the time of a loss assuming it’s covered under your property policy. It’s a time element coverage so one important factor is estimating what is your worst case scenario, how much time will your business be down. Some businesses are highly location sensitive. For instance, if you own a restaurant, you can’t simply pick up and move to another location. You’ll lose all of your clientele. So you have to rebuild. On the other hand if you’re an office, you might find it really easy to pick up and relocate your business and be up and running within a couple of weeks. So different businesses have very different exposures for business interruption coverage. Work closely with your CPA or your bookkeeper to determine what your worst case scenario is and what your maximum loss will be. You need to estimate your payroll and figure out if you’re going to be laying off employees because of a long term interruption or maybe you want to keep people on payroll because you don’t want to lose valuable employees and you’re going to keep them going for awhile. Check your current policy. Some policies cover a time period without any dollar limitation so they may cover you for 12 or 18 months. Other policies are going to have a dollar limit. Those policies require much more work on your part to make sure that you have enough coverage there. Work closely with your agent to determine what the limit should be and also include coverage for extra expenses, anything that expedites getting your business open again as quickly as possible. Talk to your agent about any coinsurance penalties. The most preferred forms have no coinsurance penalty but if there is a coinsurance on there, it means you need to insure to full value in order to have that claim not cut back at the time of a loss. When you’re really in need of income, it’s not a good time to find out that you didn’t insure for enough money and that your insurance company is going to cut back that claim. Determine what you need based on your budget and based on your exposure, work closely with your agent and you can solve this problem.