Imagine you own a preschool. Now imagine a nasty storm comes barreling through and unleashes torrential flooding, howling winds that knock down walls and, in general, just lots and lots of havoc.
Your business property insurance covers your buildings and contents, but what about the disruption to your business?
You might be forced to shut down for a few days, weeks or, if the damage is severe enough, perhaps even months. What happens then to your income, the tuition payments from parents that allow you to pay the mortgage, meet payroll and otherwise operate your school?
This is where business income insurance can be the life-saver.
This line of coverage replaces any income that you lose when you have to shut down following a covered loss. It also covers your normal operating expenses, so those teachers continue to get paid. Better still, business income coverage can also cover extra expenses above and beyond normal operating expenses.
What are “extra expenses?” Think about the cost of moving furnishings to a storage unit, or paying the rent at a temporary space while yours is undergoing repairs. Business income covers those costs.
When you’re considering business income coverage, there are a few important points to keep in mind.
First, many policies will pay for “actual loss sustained” for a specified time limit. You’ll want to consider an extended period of indemnity that covers you beyond your reopening date. After all, it’s likely to take a while for enrollment levels to return to where they were before you closed your doors.
Another important item: insurers are liable for the loss of business income only during the period of restoration, which is often defined as the length of time required to rebuild, repair, or replace the damaged or destroyed property. A period of restoration begins when the physical loss or damage occurs; it ends when the property should, with reasonable speed, be repaired or replaced.
As you might expect, carriers will want to see a lot of supporting documentation to vet your business interruption loss. So if your school experiences a business interruption loss, make sure you prepare a loss estimate early and seek cash advances from your carrier to keep things running as smoothly as possible.
Joaquin Escobar, an Insurance Advisor at CCIG, handles the risk management and insurance needs of commercial childcare and school accounts. Reach him at 720-212-2054 or JoaquinE@thinkccig.com.
CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of risk with our risk and claims management expertise and a commitment to service excellence.
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