In a capitalist economy, a general definition of business is “an enterprise or firm involved in the trade of goods and/or services to consumers in exchange of other goods, services or money at a profit.” Even a not-for-profit organization won’t able to operate in the long run if it spends more money than it receives.
If you are a new producer who is looking for a product that every business needs, the kind that competitors miss or do not understand, then you may want to consider business interruption or business income insurance.
All business owners and insurance producers know the importance of protecting property and liability risks. But in some cases, they tend to overlook protecting the most important asset of an enterprise—the profit or earnings.
The following aspects are typically covered under a business interruption policy:
- Profits that would have been earned had a loss not occurred
- Fixed costs and operating expenses that are still being incurred after a loss
- Temporary location expenses to keep the business operating after a loss
- Extra expenses and reimbursement for reasonable expenses to stay operational
- Civil authority ingress or when there is a government mandated shutdown
A related coverage is contingent business interruption, which pays when a business is unable to operate because of an event that damages the premises of one of its suppliers, thus causing business disruption and consequential revenue loss.
If an entity is covered by a business owner package policy, business income and extra expense coverage may be built in. If an enterprise is larger and is insured under a commercial package policy, the task of designing adequate coverages can be much harder. It is the responsibility of the accountant of the business entity to fill out the application worksheet. In order for the coverage to be adequate, the numbers have to be accurate and in line with what the business owners are telling the IRS about the business profits.
The effort invested in learning about business interruption and contingent business interruption can pay off when getting and keeping commercial accounts. Here are some suggestions:
- Check, study, and understand the coverage that your main commercial carriers offer. Carriers often have training sessions on specialized coverage policies that highlight particular risks. Your underwriter and loss control team can often help.
- Identify and study resources related to business interruption insurance. Nowadays, there are various online references which may be helpful to interested producers.
- Ask key questions, gather relevant facts, and listen to the customers. “What if” questions about the prospect’s key suppliers often stress the importance of business income insurance.
There’s a sense of satisfaction when the clients and producers have done their homework in the event of a disaster—the payroll is met, temporary quarters are obtained and paid for, and even the expenses and affected earnings are covered despite the difficulties. Instead of a business that’s on the road to bankruptcy, the enterprise survives and continues to benefit the community and employees. Life can be good for those who prepare. Happy prospecting and selling!
*The author may be contacted at: Tricia.Sharpton@360training.com