The longest federal government shut down in US history cost our economy 6 billion dollars. The effects were felt far beyond Washington, DC. Delta reported the shutdown cost them 25 million because government workers and contractors weren't traveling. Small businesses in MA and elsewhere were stuck waiting for needed loan applications (see here).
Could your business survive closing doors for 35 days? What if a fire destroys your building and you're unable to operate while searching for a new location? Or an ice storm knocks several trees down and your office is badly damaged, preventing you from working until repairs can be made? Your landlord will continue to ask for rent, loan payments will still need to be paid, but your revenue will be at a standstill. Your skilled employees may seek jobs elsewhere because they're unable to pay the bills. With natural disasters becoming increasingly more common, it's time to consider what might happen to your business if you were forced to temporarily close.
Business interruption coverage protects against loss of income that is a direct result of loss of or damage to your property due to a covered event, such as a fire or a natural disaster. This type of insurance is not purchased separately but is added on to or included with existing policies. With business interruption insurance, you will be covered for income lost based on income earned in the previous months. Depending on the policy, you may also have coverage for moving to a temporary location, employee wages, paying your taxes, loan payments, rent payments, and extra expenses during this time.
Business interruption coverage isn't a cure-all. If an event not covered by your property insurance policy forces you to close your doors, business interruption coverage will not help you. For example, if you don't have flood insurance and your workplace is destroyed in a flood, business interruption coverage will not apply. This is why it's important to consider how your business would be affected by a disaster when determining your coverage. Loss of utilities is typically excluded from coverage, but you can have this added as a rider.
Another type of coverage worth considering is contingent business interruption insurance, which protects you if a supplier or distributor is no longer able to provide a good or service and your business is directly impacted. For example, if you restore antique cars and one of your parts suppliers goes out of business, your revenue could be significantly harmed until you find another supplier. Contingent business interruption insurance would reimburse you for lost income.
You are covered for income lost based on income earned in the previous months, so it is crucial to document multiple months of revenue, especially if you are growing. If you have income that you don't document, you will not be reimbursed for it. You must keep your records somewhere safe! Keeping updated copies somewhere other than your business is a smart idea, and having digital backups is also recommended.
To sum everything up, business interruption insurance can cover many expenses if you're forced to relocate or close for some time. It reimburses you for lost income and can be the difference between you closing your doors forever or just closing for a little bit. The right coverage can even reimburse you for income lost if a supplier you rely on is affected by disaster. Ask yourself, if you were forced to close for 35 days, what costs would you still have? What payments would need to be made? Could you survive the loss of revenue?
Call us to discuss affordable options today or if you have any questions. Our goal is to keep your business safe, and business interruption coverage is a great way to ensure your doors will remain open.