- Business Income Coverage. This coverage will compensate you for lost income if your business suffers a property loss or damage from a covered peril such as windstorm or fire. Your business will be covered, after a brief time deductible, until restoration of the lost or damaged property is complete. In addition, the policy will cover operating expenses, such as utilities, that continue even when your business has temporarily halted activity.
- Extra Expense Coverage. During the restoration period following a loss, you may incur extra expenses to keep your business operating. Extra expense coverage reimburses your company for a reasonable sum of money that it spends over and above the normal operating expenses to avoid having to shut down during the restoration period. Extra expense coverage may also cover payroll to key employees so that you may retain them as employees.
- Contingent Business Interruption Insurance. This policy will reimburse your company for its expenses and lost profits when it can’t operate because a disaster has struck a supplier or manufacturer. For example, the massive earthquake and tsunami that hit Japan in March 2011 led to supply chain disruptions around the world. Companies who were affected and who had contingent business interruption insurance were able to use this coverage to reimburse expenses and lost profits during the shipment delays.
Is Your Business Properly Insured?
Four Questions to Determine How Well You Are Covered
Part of risk management involves not only having an insurance policy in place but making sure you have the right elements included in your policy. In addition, a regular review of your policy with your insurance agent will help ensure your policy is kept up-to-date with the changes in your business and industry. The following is an outline of four elements of your insurance policy that we recommend you review regularly with your agent.
Business interruption insurance is essential to ensuring a quick resumption of your business after a disaster. Without this coverage, your business may have to close down completely while the premises are being repaired, which may leave you susceptible to losing out to the competition. The policy limits you choose for this coverage should be sufficient to cover your company for more than a few days. There are three types of business interruption insurance: business income coverage, extra expense coverage, contingent business interruption insurance.
The coverages discussed herein are for illustrative purposes only. The terms and conditions of your specific policy may differ from those described. Please consult the provisions of your policy for the terms, conditions, and exclusions that apply to your coverage.