Did you know that many businesses that have a major fire never re-open? This is in spite of the fact that they had insurance on their building and contents? The reason being that they do not carry Business Interruption Insurance. The fact is that insuring the income stream of a successful business is just as important as insuring its building.
There are many different forms of Business Interruption. Let’s consider some of the most common:
A building owner might lose rental income if there were a fire. Especially, if it meant his tenants could no longer occupy all or part of the building. But it’s possible to have that income covered for up to a year while the building is repaired or rebuilt.
Some businesses absolutely must continue in business even if they have a major fire. Examples would be, insurance agencies, radio stations, hospitals, etc. Renting temporary facilities and equipment, running new phone lines, setting up new computers, notifying customers of new contact information, and the cost of relocating personal property can be costly. Extra Expense insurance provides the funds necessary to pay those expenses, so the business can resume operations as soon as possible.
This insures the income a business that is unable to continue its operations would have earned if it had been open. Non-continuing expenses are deducted from the estimated gross income the business would have generated to determine the amount of loss. The payroll of some key employees, or all of them, can be included. Care must be taken to choose an amount of insurance that would compensate for the busiest months income and properly estimate how long it would take to recover from the worst possible loss.
Choosing the right type of business income insurance, and making sure it is structured in such a way that proper coverage is provided requires the collaboration of the insured and an experienced commercial lines agent. But no business or nonprofit should be without it!