Business interruption insurance is one of the most important types of insurance that businesses need to acquire. All businesses should be able to pay expenses and prevent any income loss if a disaster happens. Here’s a handy guide to business interruption insurance.
Be Diligent With Record Keeping
The first, and most important thing, is to keep good records. The more detailed your records, the more likely you’ll be able to secure the funds you’ll need in the negotiation of a claim settlement if you ever have to shut down temporarily.
If you do have a loss, be meticulous in your record keeping. Your insurer will need to see copies of your expenses before they’ll begin pouring cash into the business. You should take notes and retain invoices and receipts of expenses such as equipment costs, payroll, taxes, and property costs, basically, everything you can think of. If you don’t keep track of these records, it may take a long time to achieve a final claim settlement that you find acceptable. This means you’ll have a harder time staying afloat during tough times.
Good Evaluation Helps Your Policy
Always be sure that you properly evaluate the value of your property. Periodic appraisals can help document your property’s replacement cost value. While it is not the preferred approach, older property is sometimes valued on an actual cash value basis. Actual cash value is defined as cost new less depreciation. If you have taken care in your property valuation, then you’ll be able to accurately gauge what limit of liability you should purchase to replace your property in the event of a loss.
It is equally important to carefully evaluate your business interruption exposure. Most insurance carriers and many insurance agents will provide you with a business income worksheet to help you think through this exposure. You should use your own accounting records to complete the worksheet.
Eliminate or reduce ‘waiting periods’ in your policy. Some insurance policies have waiting periods, and any losses that occur during these waiting periods will not be covered by the insurer. These waiting periods act as a deductible and usually refer to a certain time period after any major event affects your business. Barron Wall, the Managing Director at Insurance Consulting Associates in Mahwah, N.J. says, “Many policyholders suffer their worst losses as a result of waiting periods. Their policies won’t cover expenses due to the ‘waiting period’ provision.
Acquire an Extended Period of Indemnity
It’s smart to obtain an Extended Period of Indemnity. This means that losses will be covered even after you re-open your business. You will lose some of your customers while your business is recovering from a loss, and an extended period of indemnity provides you with a financial cushion until you earn them back. Often, your losses will continue to bleed into the time after you’ve re-opened. Extended periods of indemnity will pay for expenses that remain from the time when your business was shut down.
Read your policy carefully so that you aren’t taken aback by unanticipated exclusions. You should discuss any questions you have with your insurance agent. You can negotiate and customize your policy so that it properly covers your business.
Know the ins and outs of your business expenses, and then make sure that all of those expenses are covered in your business interruption insurance policy. This way you can operate your business with peace of mind, knowing that you’ll be covered no matter what happens.
Source by Russ Birch
