New York Business Insurance: Beware of Business Interruption
“We just weren’t prepared, and we never recovered.”
When Jim’s auto repair shop was hit by a devastating flood last year, nearly everything was damaged – shop equipment, cash registers and other electronics, security system, valuable records, and some of his parts stock.
Two miles down the road, Bill’s auto repair business also suffered a catastrophic loss in that flood. His inventory was devastated, his building and equipment were damaged, and his entire computer system was destroyed.
Like many others, Jim and Bill faced a daunting cleanup and rebuilding operation, but they were both confident that their New York Business Insurance policy would cover the losses and they would carry on.
Today, business is booming at Bill’s shop. After a long and difficult month, his building was repaired, his inventory and computer equipment replaced, and every one of his employees remained on the payroll.
Unfortunately for Jim, he soon ran out of cash and couldn’t pay his employees. Mounting bills only added to his stress. One of his workers left and went to work for Bill. In the end, Jim suffered yet another catastrophic loss – his business went under.
The difference?
Bill’s New York Business Insurance policy included business interruption insurance. Jim’s did not.
Most business owners would never consider opening their doors without having insurance to cover damage due to fire, windstorms, flood or other catastrophic event. But too many business owners fail to plan for how they would continue operating if their business premises were rendered temporarily unusable by a disaster.
Advance planning is critical. In addition to an adequate recovery plan, having business interruption insurance in place can make the difference between staying in business and closing your doors for good.
What does business interruption insurance cover?
The following are typically covered under business interruption insurance:
- Profits - Profit you would have been earned had the disaster not occurred;
- Fixed Costs - Operating expenses and other costs still being incurred during recovery;
- Temporary Location - Some policies cover the expenses of moving to and operating from a temporary location;
- Extra Expenses - Reasonable expenses beyond your fixed costs that allow you to continue operating while your property is being repaired.
Business interruption insurance is included as part of your primary policy, so it only pays if the cause of the loss is covered by the primary policy it’s attached to. Be sure your policy limits cover an adequate amount of time to rebuild your operations. Getting your business functioning again after a major disaster can be a longer process than anticipated, and a waiting period usually applies before business interruption coverage kicks in.
How do I add this coverage to my New York Business Insurance policy, and what will it cost?
Business interruption insurance is not sold as a separate policy, but can be added to your property insurance policy or included in a package policy such as a Business Owner’s Policy. Your insurance agent can help you understand your vulnerabilities and your options. The cost of this coverage depends on the risk of a disaster damaging your business premises, based on such factors as your location, nature of your business, and how easily you could operate out of a temporary location.
A single interruption in your business can have devastating effects throughout your organization, destroy customer satisfaction, jeopardize your company’s reputation, deteriorate profitability, and even put you out of business. Don’t lose everything you’ve worked so hard to build. Plan ahead by adding business interruption insurance to your New York Business Insurance policy to ensure that your operations can successfully recover from a catastrophic loss.
For more helpful tips, make sure to download our free report, "Ten Business Exposures That Obliterate Profit in the Blink of An Eye."