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Business Interruption Insurance: Your Key to Continuity When Disaster Strikes

Topics: Small Business Advice Loss Control

Your business is prepared if disaster strikes. You have your emergency action plan in place. And you recently reviewed your business insurance needs with your agent. So your bases are covered if a storm causes significant damage to your business, right? But, have you considered what might happen if you cannot reopen your business for some time?

Getting back to business

Business interruption insurance (also known as business income insurance) covers the loss of income a 
business suffers due to the closing of the business facility or the rebuilding process after a disaster. It is normally offered as part of a Business Owner’s Policy (BOP) or commercial property insurance policy.

BII covers lost net income, temporary relocation expenses and ongoing expenses such as payroll, caused by the business being temporarily sidelined.

“Many business owners are aware of business interruption insurance and how it works. But they tend to underestimate their coverage needs,” reports Brian Hosey, VP of Underwriting for AmTrust North America.

“A lot of times, manufacturers, for example, underestimate the time it takes to get replacement machinery. Many machines are customized, and so business interruption turns from weeks into months,” he adds.

How do you cover payroll and other expenses while your business income is stalled? Does your business have the reserves to get through six months to a year without its normal revenue stream?

If not, consider binding a BII policy with coverage in the right amount to carry the business through the period of suspended operations. The BII policy will provide you with the peace of mind that your business will rebuild and be back to business as usual as soon as possible. Keep in mind that, like any insurance, certain criteria has to be met before the BII coverage comes into play. For more information on limitations, refer to this Business Interruption Insurance fact sheet provided by the American Insurance Association.

Steps to Recovery

For quick steps to take to minimize a disaster’s effect on your business continuity, check out an excellent resource Getting Back to Business provided by The Insurance Institute for Business & Home Safety (IBHS). The brochure lists many resources available to help in this process (See “Additional Resources”). Its focus is on how to work with your insurance company’s representatives. Insurance professionals are experienced in helping businesses recover from disasters and will have specific advice pertaining to your losses, coverage and recovery. Most of the suggestions and tips offered here are meant to help start that process.

For more information on Business Interruption Insurance, please contact your AmTrust-appointed insurance agent.

*IBHS is an independent, nonprofit, scientific and educational organization supported by the property insurance industry. The organization works to reduce the social and economic effects of natural disasters and other risks to residential and commercial property by conducting research and advocating improved construction, maintenance and preparation practices.

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