Business Interruption Insurance

If severe storm damage caused your business to shut down, would you be able to sustain the company while the repairs were being made? If the closure spanned several months would you be able to pay the continuing expenses such as the mortgage or rent, taxes, the salaries of you and your employees, vendor invoices and other bills on top of the repair costs?

Less than half of all businesses have interruption insurance built into their business owner’s policy (BOP). Those that don’t, often find they do not have enough income to continue to operate the business when a loss is suffered, or, in some cases, they begin to deplete their reserves.

Make Sure You are Fully Covered

Business interruption insurance replaces normal business income when insured losses negatively impact a business’s bottom line. It reimburses a company for lost income until the company is able to resume full operations. For instance, if a business is inoperable for a month due to a fire or storm damage, business interruption insurance would typically reimburse the company in the amount of the net income that would have been expected for that same month based on previous history.

When comparing business insurance rates, be sure to check what is covered in the business insurance policy. In some instances, damages resulting from windstorms, earthquakes and floods are covered separately by special policies. If this is the case, you may need to purchase individual insurance for each. If these other policies don’t include business interruption insurance, you may want to consider purchasing a separate policy that solely covers business interruption. This is particularly important for businesses located in Florida or the Gulf Coast, where hurricanes can wipe out entire operations. In some cases businesses with special risks may not be able to receive coverage on business interruption in their BOPs, but may still be able to purchase it separately.

Many policies will include some coverage for the lack of profits due to unplanned interruptions in business, such as losses associated with property damage or theft. Business owners who have general liability insurance should not assume, however, that their insurance policy includes business interruption coverage.

The Cost of Operating Without Interruption Insurance

Unforeseen interruptions can also spark extra expenses including rent on another temporary office space, leased furniture and equipment, or overtime paid to employees when trying to speed the recovery process. If a business is not generating income after suffering damages, these additional expenses can put a tremendous strain on finances.

Additionally, as a business owner you might want to consider purchasing business interruption insurance to protect against interruptions that result from a direct loss on someone else’s property. For instance, if one of your main suppliers suffers fire damage and is unable to deliver the critical materials that are key to your operation, it could cause a significant interruption.

Business insurance rates vary based on several factors including the size of the business, the scope of work delivered, and number of employees, among other variables. While business insurance coverage can seem costly, it is an expense that is vital to your company. It can safeguard you and your company’s assets from a variety of unforeseen damages that may occur. Your insurer should be able to tell you what business insurance coverage will best fit your needs, which will also determine the cost.

In the long run, business insurance coverage that specifically addresses damages will be what helps sustain your company through a disaster and may even save your company from financial hardship or bankruptcy. For more articles like this, bookmark www.BusinessInterruptionInsurance.info

Author: James Cochran

Is there really such a thing as "bankrutpcy insurance"?   No, not really. Unfortunately, there is no insurance policy that you can take out to protect you or your business against bankruptcy.   Bankruptcy Insurance would be quite a policy in this day and age with a tough economy, a global recession and sagging consumer confidence and spending.

With that said, however, there are different forms of insurance that can help to protect you, your business, your family and precious assets against major risks that could cause a serious financial loss that could lead to bankruptcy. There are unforeseen circumstance, above and beyond the economy, that can pose a financial challenge for your business.  Here are some of those types of insurance policies you can evaluate for you and your type of business:

Product Recall Insurance: With the recent issues with toy recalls and other kinds of food recalls, product recall insurance can certainly help a business minimize the financial damage done with a product recall. Product recall insurance is a policy that is considered "extra-expense" coverage and not legal liability type coverage. For example, a product recall insurance policy may cover the expenses incurred with having to remove the product from your shelves. These expenses could include print or aired communication in notifying customers of the recall, any expenses in mailing notifications to customers or vendors, paying employees any overtime benefits that were involved in the physical recall of products from the shelves and their disposal or return to vendor. These costs can be considerable.

Business Interruption Insurance: Business interruption insurance covers the interruption of business should a disaster strike your business, such as a fire or serious windstorm. Business interruption insurance is not an individual policy, but included in a package policy. With a business interruption insurance policy you may be compensated for lost income, the profits you were forecasted to earn and operating expenses that continue even if you have temporarily ceased operations (like your utilities).

Employee Lawsuit Insurance: Insurance companies now offer policies that protect companies against costly litigation for sexual harrassment, wrongful dismissal or discriminatory employment practices.

Corporations also can benefit from insurance products that protect them from fluctuating interest rates and currencies. Foreign currency fluctuations can very dramatically impact a company’s ability to be profitable, in a manner that they could not foresee or control. Corporations, including one that I used to work for, even have insurance policies to protect the business against severe weather patterns that risk business profits.

One of the best ways to protect yourself, your family and your assets is to Incorporate your business, or become a Limited Liability Company. By structuring your company correctly you can protect yourself, your partners and any shareholders from being personally liable for the debts that the business incurs and struggles, or ceases, to pay back.   There are savvy ways to structure your business that basically act as an insurance policy, if you will, that protects you.

If you have more questions about how to best protect you and your business with any of these insurance products, contact your insurance agent or a business attorrney.

Business Interruption Insurance offers the following information on business interruption insurance, how valuable it can be and how to get the best policy for your business needs.  Business Interruption insurance is often referred to as "bankruptcy insurance" as it has been a lifeline for many small business owners who have faced business interruptions that would have otherwise caused them to potentially have to close their business. 

Business interruption insurance refers to that insurance which covers the risk of losses a business may have to suffer because of a temporary closure of the business due to some circumstances like fire or other insured peril. Business owners who bought business interruption insurance get the compensation for lost profits and recurring expenses.

Explore All the Options and Make a Wise Decision:

Insurance providers offer several options for business interruption insurance. For example, a policy reimburses you the extra expenses if you need to perform business operations from a new place because of some disaster at the original place. Choosing this kind of option is an indication of buyers’ foresightedness and good judgment.

How to Buy Business Interruption Insurance?

The unique character of business interruption insurance is that it alone is not sold as separate insurance policy. If you want to purchase this insurance, ask the insurance providers to add on to an already existent property insurance policy. A typical example is business owner’s policy on which Business interruption insurance can be added. Before finalizing, make sure by asking to the agent if there is any new offer by the insurance company.

Make Sure That You Get Enough Time:

One important point to keep in mind when buying Business interruption insurance is that you should get enough time to restart your business as usual. A major disaster can damage to such an extent that rebuilding business can take more time than you had estimated. Normal waiting period is approximately 2 days. Waiting period is the time for which the insurance providers do not start making payments.

Factors Affecting Price:

Factors that affect the price of business interruption insurance include the kind of business, location of the business and the degree of ease of shifting to a temporary location. For example, a real estate agency may get a cheaper deal than a restaurant because the risk of fire associated with it less than restaurant.

If you have bought the business interruption insurance cover and a disaster occurs, then the insurance provider will reimburse you actual amount of money that you would have earned had the business activities not got disturbed. This calculation is done on the base of your financial records. You also get compensation for the expenses like electricity because it is a continuous expense whether business is running or not.

Don’t Think That You Will Never Need It?

Finally, you should not avoid buying business interruption insurance just by giving an excuse that these situations are hypothetical. September 11 event has shown that business interruptions may happen. The place from where you are earning your butter and bread can be completely damaged.

Author: Alexander Gordon

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