You’ve purchased an insurance policy for your business that covers destruction of property due to casualty like fire, vandalism or flood. But what about the income you will lose if your business has to shut down? After a catastrophic loss it can take weeks or months to make necessary repairs to your property. Any restaurant or bar owner will tell you that having to be shuttered for even a day can be extremely damaging; an extended non-operations period could be disastrous.
Without additional Business Income and Extra Expense coverage you may find yourself unable to ever open your doors again.
Why? Unlike a basic policy that just covers replacement of the things your business has lost (inventory, equipment, etc.), Business Income and Extra Expense policies can replace the essential income you lose while unable to operate and cover costs you would not have incurred if an incident has not occurred. Let’s examine these two additional coverages and the importance of each:
Business Income Coverage: You may also see this referred to as “Business Interruption Coverage” — an essential policy element that protects you against any loss of profits or income during the time your business is unable to operate normally. If you are a restaurant or bar, that means all days/nights you are unable to welcome customers or fulfill to-go orders. A professional service company may be unable to send out technicians due to loss of a call center or headquarters.
Working with your broker you can determine the different ways a loss may affect your ability to generate income and ensure your policy is adequate.
Business Income Coverage is also essential to cover those hard costs that will continue even if you have no income coming in, like membership dues, subscription or license fees, payroll or recurring monthly payments on equipment or vehicles.
Extra Expense Coverage: If you experience a loss and are awaiting repairs or replacement equipment to get back on line, you may find yourself incurring other costs that would not have happened without the incident. Perhaps you need to pay rent or utilities on a temporary space or lease equipment as a bridge until your original space is repaired; all of these are ‘extra expenses’ you would not normally pay under standard business operations. Without an Extra Expense clause you will find yourself paying these hard costs out of pocket.
Extra Expense coverage also helps you cover the costs that it takes to determine what is needed to get your business back up and running — such as hiring help to restore lost data or records that may have been lost in a fire for example. Finding and organizing accurate reports of what it will take to get your business back to 100% is essential for a speedy restoration of operations and you may need outside assistance such as an auditor to determine what actually needs to be replaced and potential costs.
You may be hesitant to add these coverages, thinking your location is secure or an accident is unlikely. However, think about this: What about if you are unable to use your business location due to an incident beyond your control? Perhaps a sinkhole or water main break damages your access from the street? How would you protect loss of income if guests could not get into your restaurant because the business next door suffered a fire and major structural damage has red tagged your building temporarily? While you are potentially dealing with some sort of outside insurance or city claim for losses, Business Income Coverage is an essential protection to guarantee an income stream.
Be sure your existing policy has these critical coverages so an incident doesn’t result in the loss of the business you have worked so hard to build.