Smart Questions for Your Insurance Agent
Are you protected if a catastrophe hits? Quite possibly not. More than half of small businesses don't have business-interruption insurance, a recent survey found. Get on the case by asking these questions:
- Coverage kicks in immediately after a disaster, right? Don't count on it. Most insurers wait two to three days before covering the loss of income you would be earning had nothing happened, plus any normal operating expenses, such as salaries and taxes. Make sure you know how long your waiting period is.
- What about extra expenses? If your property is severely damaged, you may need to rent temporary office space, buy new computers, and rack up other expenses to stay afloat. Insurers call these "extra expenses." In most cases, both lost income and extra expenses are covered by a single business-interruption policy--but not always. Be sure you're getting both, and talk to your agent about how much coverage of each your business needs. Many companies woefully underestimate how long it will take to repair their property. "It can take two months just to get debris removed and the permits approved," says Matt Clysdale, president of Maguire Agency, an insurance agency in St. Paul.
- What if a key supplier has a disaster and can't deliver my order? Standard business-interruption insurance won't cover you if one of your main suppliers or customers sustains a loss that affects your ability to stay in business. If you have this type of exposure--and many companies do--you'll need to get contingent business-interruption or dependent-properties coverage.
- Can I continue to pay my employees after a disaster? Business-interruption insurance normally covers the salaries of your officers, managers, and other key people, though you have the option of extending that to everyone else, collectively known as your "ordinary payroll." Many companies don't, but if you're in a tight job market, it might make sense to buy enough coverage to pay your entire staff for, say, the first 60 days after a loss.
- Are all my locations covered under one limit? Say you have offices in four different locations, each with $100,000 worth of coverage. If one office burns down, the most you can collect from the insurance company is $100,000, even if your claim runs higher. But if you have a blanket limit of $400,000 covering all four sites, you can collect that much on any loss. Blanket limits are available for business-interruption insurance, too. You'll pay extra--"but it's worth it because the coverage is more flexible," notes Clysdale.
- What if lightning knocks out a transformer nearby and knocks out my power? You're okay if you have something called off-premises power coverage. It kicks in when you're affected by a loss or damage experienced by any services provider, including electrical, fuel, sewer, fiber-optic cable or T1 service.
- Does my coverage include an extended period of indemnity? Normally, coverage ends once you can reopen your doors for business. But it may take time for things to return to normal. With an extended period of indemnity of 30, 60, or 90 days, you're covered for losses you continue to incur during that period.