Advantages of Carrying Business Interruption Insurance This Summer

Many companies carry business interruption insurance to protect their companies in case of a hurricane, fire or other disaster. With seasonal businesses that make the majority of their income during summer, the loss of even a few weeks of business can be devastating to their long-term survival. Summer business owners who purchase business interruption insurance can mitigate losses and keep their companies intact while they rebuild.

Will Pay Static Expenses

Even if the business is closed, lease payments, equipment rental fees and taxes will still need to be paid. Business interruption insurance covers all of these costs until the company can resume business. It may also cover financial obligations to suppliers and other third parties.

Covers a Portion of the Income Lost

Business interruption insurance should cover some of the profits the company expected to make during its closure. In order to prove expected income, it's important to have a copy of the business's financial records at a secure location. Insurance companies will often ask for verification of the previous months' sales as well as the sales data from the previous years during the time when the business was affected.

Can Cover Employee Wages

Business owners should consider purchasing business interruption insurance to protect their valuable employees. Even if employees qualify for unemployment while the business is closed, unemployment will not cover the workers' full salary. If the business needs several months to rebuild, it could lose skilled labor to competitors. Business interruption insurance will pay employee wages, so the business can keep its staff intact.

Might Fund Relocation

If a building is significantly damaged, it may make financial sense to temporarily relocate a seasonal business. Business interruption insurance should cover some of these costs, including the expenses incurred to move inventory and equipment. However, business interruption insurance will not usually cover a permanent relocation.

Getting a Policy

Before purchasing business interruption insurance, business owners should determine their weekly static operating costs and expected profit. They should also determine how long they might be closed in a worst-case scenario. Multiplying the estimated weekly expenditures and profits by the estimated closure time will yield the per-incident coverage needed for the business. Some business interruption insurance policies have a low per-incident limit that may not cover the true loss to the company.

Prospective business interruption insurance buyers should also know that a typical waiting period is 48 to 72 hours. Once that threshold is reached, business interruption insurance will begin to cover the lost income and other expenses. It is not retroactive, however, so the business owner is responsible for the gap between when the business closed and when the insurance coverage began. Business owners who would like to further discuss Cleveland business insurance should call Summit Insurance Agency at 330-655-0655 for more information.