Business Interruption Insurance: Protecting your Business by CarolynFlaherty

As a Wrentham resident where 5 days after hurricane Irene blew through town, approximately 20% of home owners and a significant percentage of business were still without electricity and many without water, the idea of business interruption insurance has been on my mind.

In fact, while visiting a fortunate local business that was up and running; I was conversing with the owner about an ice cream shop that likely lost all its product and whose doors were still closed. I mentioned that the shop was probably covered by business interruption insurance. The business owner I was speaking with did not even know such a thing existed. Which caused me to realize that perhaps many of the small business owners in the area were experiencing substantial financial loss.

Therefore, perhaps a day late and more than a dollar short for this go around, I thought I would take the time to explain a little bit about how to protect your business from loss of income.

While most business have property insurance policies that cover damage to their buildings and equipment, what about the profits lost should your business doors be shut due to damage, power outages etc.? In a catastrophic storm, a business could be closed for a significant period of time while pending repairs.

Interruption insurance covers estimated profits you would have earned had your property not been damaged by a covered disaster as well as operating expenses that are incurred while business is closed, (for example rent or electricity). Some policies even cover expenses incurred to operate from a temporary location, (referred to as "extra expense insurance"). Extra expense insurance is usually paid if it helps to decrease the business interruption costs.

Business interruption insurance can not be purchased as a stand alone policy, but is available as an add on to your property insurance policy or included in a package policy such as a business owner's policy. Rates and options vary based on the amount of coverage you select as well as your location, nature of business etc. Most policies require a 48 hour waiting period before coverage begins.

Taking the time to evaluate your insurance needs should be part of you annual financial “check up.” Consider all changes to your business and growth that may have occurred during the year to ensure you are adequately covered. And please consider business interruption insurance because not having this form of protection can compound an already unfortunate situation.