When thinking about commercial insurance, many business owners automatically think about protecting their property against a devastating fire or storm damage. However, if your NH business suffers a loss which forces the company to shut down, the damage to your building and business property is just a piece of the pie. Are you prepared to continue to pay your expenses while your business gets repaired or rebuilt?
What is Business Interruption Insurance?
Business Interruption Insurance is also known as Business Income Insurance. As the name implies it protects the loss of net income to your business caused by a covered property claim such as wind, theft or fire damage. It covers the time when the business is closed until the property is repaired or replaced. If you are forced to shut down while your building or critical equipment is being repaired or replaced from a covered loss, you would most likely lose an essential revenue stream depending on the nature of your business. Though the revenue may have stopped or slowed, many financial obligations do not, making it very difficult to pay any outstanding loans, taxes, payroll, benefits, insurance and many of the other expenses that continue regardless of whether you are operational.
How Much Business Interruption Coverage Do You Need?
Because business interruption insurance covers the income that your business would have earned if the covered loss had not occurred, the claim will be estimated based on your company's financial records. It is critical that you maintain accurate and updated financials, and preferably backed-up off premises.
It is essential to have an adequate limit as a business that has to close down while property is being repaired may lose out to competitors. A quick resumption of business after a disaster is essential; however keep in mind there is typically a 48 hours waiting period on most business interruption coverage.
Speak with your local NH insurance agent about the details of your business and how much coverage your business may need to get through a major loss. Consider any peak seasons and worst-case scenarios keeping in mind that the longer your business is shut down, the greater advantage for your competition. Here are a few other factors you will need to consider:
- The type of business you operate
- How easily your business could relocate to a new location
- How long would it take to recover/rebuild following a covered loss
- Add up net profit, payroll and ALL expenses from your P&L statement
- Consider anticipated growth in following year
It is definitely a good idea to periodically review this limit on your policy as your NH business's income and expenses change over time and many insurance companies require an accurate limit of coverage in order to be adequately compensated after a covered loss. This is known as the co-insurance requirement and would be found in your policy if applicable.
How Much Does Business Interruption Cost in New Hampshire?
The cost of business interruption insurance is related to risk of property damage from fire or other disasters damaging your operation. The cost to get a large manufacturer back up and running after a covered loss would most likely be greater than a real estate agency that could operate out of an alternative location more easily.
How Do You Purchase Business Income Insurance?
Business Income coverage is not typically a separate policy but instead incorporated into a business owners policy (BOP). A huge benefit of it being included on a BOP is that loss of business income is typically covered on an "actual loss sustained" basis for up to 12 months. This takes the difficulty out of estimating how much coverage is needed. If your business is on a NH commercial package policy, coverage is not automatic and must be requested with adequate limits selected. Regardless of which type of policy, business interruption coverage can benefit any business, no matter how large or small.
Disaster can strike at any time. Property insurance can help recover physical materials and rebuild your commercial building, but it cannot replace the income you stand to lose during repair or reconstruction. Business interruption insurance is a vital piece to any business's protection and longevity. For specifics about your business and business interruption coverage contact an insurance professional.
This material is for informational purposes only. All statements herein are subject to the provision, exclusions and conditions of the applicable policy or state laws. For an actual description of all coverages, terms and conditions, refer to the insurance policy or speak with an insurance professional.