What catastrophes are covered?
Business interruption insurance typically kicks in after any catastrophe that prevents a company from doing business. Common catastrophes that are covered include fire, lightning, hurricanes, tornadoes, and massive ice storms. Make sure to carefully read any policy you’re considering to see exactly what’s covered.
To be eligible for coverage after a catastrophe, you must report the event to your insurance company. There may be a waiting period between your report and the start of coverage. For example, some policies don’t begin paying benefits until 48 to 72 hours after you report the event.
What business expenses are covered?
Business interruption insurance typically covers:
• Loss of income during the period that your business is inoperable
• Rent or lease payments for a temporary facility
• Rent or lease payments for replacement furniture, machinery, and equipment
• Tax payments
• Salaries of key personnel
After a catastrophe, it’s important to get your business up and running again as soon as possible. Your customers probably won’t be able to wait very long for you to rebuild your business before they’re forced to buy elsewhere. And your key employees could be forced for economic reasons to leave your business during a shutdown to seek another position elsewhere.
Even if your business has enough insurance against direct property losses, the extent and duration of your indirect losses could significantly erode your cash reserves. It’s possible that your indirect losses could exceed your direct losses. For example, delays in rebuilding or repairing your facility could prolong the expenses you’ll need to operate in a temporary location.