business interruption insurance

Business Interruption Insurance For When All Hail Breaks Loose

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The recent hailstorm that forced the closure of the Colorado Mills shopping mall left the fate of hundreds of workers in question. It also was likely to cost the City of Lakewood $2 million or more in lost sales tax revenue.

CCIG’s Michael Kline.

Insurance, of course, is likely to pick up most, if not all, of the cost of lost inventory and any repairs to shops.

But the mall, according to news reports, could be closed until November. That’s more than six long months without opening its doors, without customers, without sales, without any way to make money.

According to the Small Business Administration, 40% of businesses do not reopen after a catastrophe or other disaster, and another 25% fail within a year.

The news, fortunately, is better for retailers in the mall with Business Interruption Insurance, also known as Business Income Insurance.

Their BI policies will help them recover by covering net income lost during the period the mall is undergoing restoration.

Their policies will also cover fixed expenses, including rent and utility costs.

With Extra Expenses coverage added, a BI policy also will cover the expenses of operating from a temporary location – even if the rent might be higher.

Many businesses, especially smaller ones, lack BI coverage.

That’s a big gamble considering two in five businesses have suffered a business interruption loss in the last five years, according to the 2017 Risk Management Society Business Interruption Survey.

If you decide to shop for a business income policy – or decide to take a closer look at yours after reading this – make sure the BI limits are sufficient to cover your company for more than a few days. You’ll want to do that because after a major disaster, it can take more time than you might anticipate getting the business back on track. Also, there is generally a 48-hour waiting period before business interruption coverage kicks in.

If you’re shopping for the first time, keep in the mind that the price of the policy will be based on the odds of a fire or other disaster damaging your premises. For example, everything being equal, the price would likely be higher for a restaurant than a real estate agency, because of the greater risk of fire. Also, a real estate agency can more easily operate out of another location.

Some business owners, of course, think they’ll never need BI coverage because, in case tragedy strikes, they can get up and running again elsewhere quickly. However, a BI policy will help pay for the move, as well as the lease on the damaged location.

Michael Kline is a CCIG Vice President. Reach him at MichaelK@thinkccig.com or 720-212-2042.