Wednesday, October 29, 2014

Business Interruption Insurance

Business interruption insurance covers your actual business from the loss or damage to your income due to a loss at your business. Business interruption insurance is best explained with an example.
Sue and Mike own an ice cream shop in a leased space downtown. The income is generated through take out treats as well as some sit down business at their location. They have several freezers for storage and service, a storage area for paper goods, restrooms, and small retail area for their customers. The shop averages $700 a day and monthly income is about $21,000 in revenue. The shop nets about $1500 a month not including salaries paid to both Mary and Bob who both there together.
A fire in the building destroys the shop. A claim is submitted to the property insurance. However, to maintain the space, utilities need to be paid, equipment loans paid, minimum orders are required by several vendors to maintain the business. At this point, there is no revenue being generated but bills are still coming due. A contractor is hired, and new freezers and equipment ordered. Still, it will take 6 weeks or more to get up and running. Since no revenue is being generated, Sue and Mike also have no income. This is a tough scenario for Mary and Bob. Imagine the stress these business owners and married couple are facing.
However, their insurance professional added Business Interruption insurance to their coverage. This insurance will cover the loss due to time, quantity and other values. 
For example, Sue and Mike submit a claim based on actual business records of losing $31,500 in revenue and profits of $2250. Now, the shop has this covered as well as the property insurance claim, allowing them to get through to re-opening the business.
Ask you licensed insurance professional if business interruption insurance is appropriate for your business. Many businesses are forced to close for good by not preparing for the down time and revenue loss.

If you have any questions about business interruption coverage, your property damage or an business insurance claim, please contact me.