By CYRIL TUOHY, managing editor of Risk & Insurance®
Throwing in business interruption coverage on top of standard property coverage is a no-brainer. For an incremental amount, why wouldn't a risk manager pick up the extra coverage, particularly in this soft rate environment? Rates are already low, and getting lower. Carriers can't give the stuff away.
Business interruption, you will recall, is coverage that reimburses you for lost income if your company has to clear the premises because of disaster-related damage, from a hurricane or a fire, and you can no longer run the business.
Business interruption, which protects income and continuing expenses, pays the policyholder cash--cash the insured would otherwise not have received. The amount is calculated based on the financial records of the business.
So, for example, after the massive tragedy on Sept. 11, 2001, the scores of business around the World Trade Center that were out for weeks and months following the clean-up, would have been compensated under such a policy had they bothered to buy it.Instead, dozens of businesses large and small went bust even though they were reimbursed for their physical losses.
Those business interruption payments would have been separate from the compensation offered them through their property policies that covered the physical damage sustained by the collapsing towers.
The rub with business interruption coverage is that it isn't sold separately. It has to be added to a property insurance policy or included in a business owner's package policy. Buyers can find extra business interruption coverage for longer coverage times and higher coverage amounts, if they so choose. The policies often don't kick in right away, but start 48 hours after the business suffers an initial loss.
So, what's not to like in a business interruption policy? Nothing. Particularly if your broker can "throw it in" with your property coverage. Then you can push hard for a deep discount, which your broker should be able to get you in this buyer's market.
There's a price to pay for business interruption, yes, but it's a small price. There's no free lunch, remember, so the coverage is going to cost you something. But with this kind of value offered in the marketplace--like business interruption coverage stacked atop a property program--buyers ought to jump on this opportunity. You'll be sorry if you didn't. And if you don't like it, or if you need to trim your budget, you can just go ahead and cancel it at the next renewal, no hard feelings.
If you have to buy property coverage, then you might as well add business interruption to it.
(Read Senior Editor Dan Reynold's Counterpoint, "Not So Fast With Coverage for Business Interruption.")
April 1, 2011
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