How Business Interruption Coverage Works
Though it may not be front of mind on a day to day basis, Business Interruption Coverage is an absolutely essential part of any business operation. At its core, Business Interruption Coverage (also known as Business Continuity Coverage) helps to ensure that your enterprise can carry on in the aftermath of an emergency or disaster: a family emergency, employee absence, a shutdown due to a natural disaster or an act of vandalism, among others.
The number of businesses that fail to reopen after a forced unseen closure is staggering. Sources claim anywhere from 29-40%. Business Interruption Coverage is a safeguard against the unknown that can get you going again when the proverbial dust has settled.
What type of Business Interruption Coverage do I need?
There are three kinds of Business Interruption Coverage: Business Income, Extra Expense and Contingent Business Continuity.
Business Income Coverage works to replace the income that your business would have generated, generally until the business is up and running again, or within a specific timeframe. That income, defined as net profit or loss before taxes, includes typical operating expenses and staff payroll.
What do I need to consider for Business Interruption Coverage?
There are three items to consider for complete coverage under the Business Interruption heading. First, in a changing marketplace, is it now a good idea to insure your direct labour costs? Secondly, develop a realistic timeline for getting your business back up and running. It’s best to calculate in favour of a longer period. Third, while you were shut down, your customers/clients have most likely found an alternative to your business. An extended coverage period will give you more time to re-establish yourself.
What about coverage for restoring the business?
That’s where Extra Expense Coverage comes in. This type of protection helps to cover certain expenses required to continue operating at your original location or at a second and temporary location. Think rental and moving costs, phone and Internet connections, employee overtime, etc.
What about coverage when a key supplier has to shut down, and not us?
This is one of the most overlooked areas of Business Interruption Coverage. Contingent Business Continuity is an extension of coverage related to your loss of income if a business that supplies you has to shut down as a result of an emergency. For example, if a business that supplies a good or a service to you experiences a fire and must shut temporarily, chances are you would not be able to carry on business as usual, and you may have a claim in this circumstance.
How do I get Business Interruption Coverage?
This is a topic best discussed with a professional. Cooke Insurance offers Business Income, Extra Expense and Contingent Business Continuity coverage. Talk with one of our agents to determine what best suits your specific scenario. Your Cooke agent can help you look at what your “exposures” are, and what the best Business Continuity plan for you and your enterprise is. Call Cooke at 1-800-566-5666 or click here for our Staff Directory.