Business Interruption Insurance: Understanding the Basics

With the recent back-to-back hurricanes that swept the Gulf and the East Coast the last few weeks, business owners are seeing the reality of what a catastrophe can do to their business. In the event a hurricane, fire, tornado or flood damages your business, or leaves it unable to operate for an extended period of time, Business Interruption Insurance, otherwise known as Business Income Insurance, can allow you to stay in business. In this article, we’ll answer some common questions regarding the coverage, guiding you to the most comprehensive and effective coverage for your needs.

According to FEMA, the effects of a disaster can cause serious financial consequences for your business. In fact, a surprising 40% of small businesses fail to re-open following disaster due to lack of or miscalculated business interruption insurance. Statistics from the United States Small Business Administration indicate that over 90 percent of businesses fail within two years after being struck by a disaster. Here are some factors to consider.

Carrying too little insurance.

If your business is growing, it’s important to factor in how much insurance coverage you’ll need to extend to your future endeavors. If a disaster is approaching, such as hurricane season or a tornado, it’s best you speak with a trusted insurance representative as soon as possible to ensure adequate insurance is in place.

Contingencies.

A loss of utilities goes hand in hand with a catastrophic event. If your business relies on more than just electricity, such as gas, oil or water, it’s wise to add a utility coverage contingency to your plan.

 Increased operating costs.

Operating out of a temporary location or replacing damaged machinery might contribute to increased operating costs following a disaster. In anticipation of these instances it may be important to add an extension to the policy to cover the costs incurred which are in excess of the normal costs of working. Such costs may also include things such as additional rent on temporary premises, or additional wages for staff to assist in the clean-up. These increased costs will be deemed reasonable and necessary in order to avoid diminishing turnover or output as a consequence of the damage.

About FGIB

Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for financial entities, in addition to providing crime insurance and general business insurance products to a number of firms across the United States. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (626) 793-3330 to speak with one of our professionals.

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