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What if a disaster leaves your business inoperable?

Few business owners would dare think of leaving their buildings and contents uninsured. Yet, most business owners today have inadequate insurance coverage or even no coverage at all on the real purpose of their businesses—the earnings they produce.

Continued business income is just as important to a "disabled" enterprise as continued wages are to an individual who might be injured or sick. Business interruption insurance is "accident" insurance for a business; earnings continue to be paid even after the business has been wholly or partially disabled by a disaster. Business interruption insurance is designed to do for the business what the business would have done for itself had no loss occurred. Its purpose is to pay for the lost net profits of the business plus any continuing expenses that occur during "down time" that are caused by covered perils.

Coverage Choices

Most manufacturing and mercantile firms require business income coverage. When the firm's future net profits are correctly estimated and added to the firm's expected necessary continuing expenses during a suspension of operations, the resulting sum can be used to determine the proper level of business interruption insurance to maintain.

When properly done, an income stream can continue as if no interruption had occurred. Many businesses cannot afford a shutdown either because of the nature of their operations or because a shutdown might result in a permanent, irreversible loss. They must remain "open" even though property has been severely damaged.

Banks, dairies, bakeries, and newspapers, for example, need to make "stopgap" arrangements when a permanent location becomes inoperative. In such cases, extra expense insurance is more appropriate to help pay expenses over and above what would have been normal and customary. Overtime wages for employees, extra travel, and the costs of working with substitute or makeshift facilities could be covered by extra expense insurance. In short, extra expense insurance is intended to keep the name of the business "in lights."

Due to the nature of some businesses, both business income coverage and extra expense insurance may be necessary to cover overlapping areas of exposure. The key is to complete an analysis of your business's specific needs, and to obtain appropriate coverage before it is ever needed.

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