Cover your assets: Business Interruption insurance, part 2

When your business shuts down from a fire, hurricane or because a car plowed into the side of your building, how are you going to pay your mortgage or rent, payroll, medical insurance, telephone, advertising, and most importantly, yourself? If you have Business Interruption insurance, you are covered.

Business Interruption pays for your expenses when your business is closed because of a loss that that is covered by your policy. Your profit is covered, too! If you are a sole proprietor and your monthly profit is approximately $4,000 after expenses — meaning that’s what you take home for your personal life — your insurance policy will keep that coming until you reopen for business, provided, of course, that repairs proceed at a reasonable pace.

Here are five things to know about buying Business Interruption coverage:

Ask for it!

Most policies don’t automatically include Business Interruption coverage, however it can easily be added to almost any property policy, the same one that covers your building and/or your business furniture, fixtures, inventory and improvements. For landlords, it is often called Loss of Rents.

Know your coverage

Business Interruption insurance kicks in once you have incurred a covered loss to your business property that makes you unable to be open, or to operate at a reduced capacity. Coverage can begin as soon as three days after the loss; some policies have longer waiting periods after windstorms or hurricanes.

Learn what’s covered

If your policy excludes hurricane or theft, the same exclusions apply to your Business Interruption coverage. Tell your agent what you’re concerned about and find out if your policy covers those things.

Prepare for what’s

not covered

Business Interruption does not cover loss of market; for example, if sales are slow due to the economy, a disaster that takes place elsewhere or flood damage. It only applies when your own business property is damaged from a covered peril. Have a separate financial cushion for any of these possibilities.

Check out extras

What would happen if your major supplier for parts, food or inventory had a horrible fire? “Dependent Properties” replaces your income stream that’s lost, if a location you rely upon is damaged. Would you be in the dark without electricity? Add coverage for loss of power (be sure it includes overhead transmission lines). Will it take more than 30 days after you reopen for your clients to come back in droves? Add “Extended Period of Indemnity” so that your insurance policy pays you the difference between your pre-loss income and your new one.

Remember, all business insurance policies are different. Talk with your agent and read your policy so you know you have covered your assets.

• Have a question about business insurance you’d like answered in this column? Email Pamela V. Brown at Pam has 30 years experience in the insurance industry, most in Hawai‘i. Contact Pam at 821-8899, call her mobile at 651-3533 or visit online at


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