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business meetingA disaster, such as a fire, may shut a company down for the short term.  While the business is not operating, business earnings can stop or diminish significantly.  Yet, expenses can continue and may even increase during this period.  This is where Business Interruption coverage comes in.  It is intended to cover the loss of net income, temporary relocation expenses, and ongoing expenses such as payroll, electricity, rent or mortgage. 

Coverage Limitations

Insurance is intended to financially return someone to where they would have been had the loss not occurred.  Therefore, the business would be required to submit records that would provide a good idea as to what the business would have essentially lost in net income.   It is recommended that businesses keep a copy of at least 12 months of financial records offsite for this very reason. 

Most policies include a waiting period, for example 72 hours, before coverage will start.  A maximum amount paid out every 30 days as well as the amount paid out overall for the loss of net income is determined when the policy is purchased.   The policy will also spell out the maximum time the coverage will last.  So for instance, a policy may state coverage will only apply for 120 days, include a limit of $120,000 with a monthly limitation of ¼.  This would specify that the business owner would only be entitled to a maximum payment of $30,000 each month with a $120,000 maximum paid out over the course of 120 days. 

Extra Expense

Extra Expense coverage is used to offer relief from extra expenses a business incurs to keep the doors open, such as relocating to a temporary location while the primary location is being repaired.  This coverage is provided in addition to Business Income coverage. 

Extended Period of Indemnity

Typically, Business Income coverage will stop when business operations are resumed.  Yet, just because business resumes, doesn’t mean the normal flow of income instantly returns as well.  Extended Period of Indemnity can offer coverage in the interim, from the time the business is able to re-open its’ doors to when the income resumes to normal income levels.  However, there will be a cut-off date imposed as to how long the coverage will apply as the insurance company can not guarantee income restoration.

How to purchase Business Interruption Insurance

Business Interruption coverage is not sold separately.  It can be added to a commercial property insurance policy or a business owner’s policy. 

For more information about Ohio business insurance, contact Tom Jones Insurance at 740-467-2040.
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