Smart Business Magazine, January 2021

26 Smart Business January 2021 Your business is housed in a solid building You have a sprinkler system Your property is insured If something happens to your location its just matter of cleaning up and carrying on right Unfortunately too many business owners think this is true and fail to have adequate business interruption coverage to pay for their expenses while they are rebuilding and unable to operate says Nate Bell CIC producer at Zito Insurance Agency If your physical space is damaged by a Covered Cause of Loss such as a fire or wind or hail business interruption insurance will pay your lost net income along with ongoing expenses until you can get up and running again he says Smart Business spoke with Bell about how business interruption coverage could make the difference between a full recovery and going out of business WHAT IS BUSINESS INTERRUPTION COVERAGE Business interruption coverage is insurance that replaces business income lost as a result of a covered claim that causes physical damage to your property that prohibits you from operating your business from your physical location For the time that you are unable to conduct business it provides income to cover ongoing expenses such as payroll and taxes It can also cover extra expenses that help you get up and running as quickly as possible costs that you otherwise wouldnt have incurred For example while your property insurance would cover the replacement costs of building and equipment damaged business interruption insurance can cover the additional expense for leasing building space down the road to get up and running as quickly as possible However most policies do not cover losses due to a pandemic because it isnt included as covered cause of loss in a standard property policy Some policies have specific exclusions for losses due to a virus Unfortunately many insureds were hopeful that Business Interruption would help offset losses due to government shutdown of businesses but COVID 19 has made more business owners aware of what can happen if they can no longer use their facility highlighting how much business interruption insurance is needed HOW CAN OWNERS DETERMINE HOW MUCH COVERAGE THEY NEED Your trusted adviser can walk you through the process Using an industry specific BI spreadsheet you determine what you would do if your business had to shut down and what funds you would need to remain viable There are several factors to consider A business in the service industry may be able to operate from home so it doesnt have as much exposure and may be able to continue to operate if its physical space is unusable A manufacturer requires a physical location to continue to operate and there would need to be more coverage than other industries Another variable is whether you own the building If so you may be more dependent on it than if you lease depending on your lease agreement You can typically find another building to lease but if you own that building is critical to your operations A business owner can opt for coverage that includes payroll expenses allowing it to continue paying employees while repairs are made to the building Depending on your industry you may choose to forgo this letting your employees seek other jobs but most businesses choose this coverage so they dont lose good employees to competitors It is crucial to ensure you have adequate coverage limits so dont guess Sit down with an agent and go over a business interruption worksheet to identify the level of coverage you need Then review your needs annually if not more often to ensure your levels of coverage remain adequate WHAT WOULD YOU SAY TO OWNERS WHO THINK THEY ARENT AT RISK Many companies even those with covered losses have gone out of business because their limits werent adequate to recover It always takes longer than estimated to rebuild after a loss If you think it will take 12 months it will typically take 16 to 18 Too many owners think Its never going to happen to me Im never going to lose the building and be shut down for months But it does happen and your expenses arent going away because you arent operating and if that period goes on longer than anticipated you could be out of business Nate Bell CIC Producer Zito Insurance Agency 4402995212 natebell@ zitoinsurance com INSIGHTS Business Insurance is brought to you by Zito Insurance Agency INTERVIEWED BY SUE OSTROWSKI INSIGHTS Business Insurance WEBSITE For more information about how business interruption coverage can help your company rebuild visit www zitoinsurance com After a disaster Business interruption coverage can help pay expenses while rebuilding