2014 might not have had a very active hurricane season, but it did have its fair share of other natural and manmade disasters, including blizzards, wildfires, mudslides, and riots. These tragedies serve as sobering reminders to always expect the unexpected.
When it comes to your Maine-based business, it’s important to remember that it could become a victim of Mother Nature or other external forces without warning. After a disaster, an estimated 25 percent of businesses are unable to reopen. Just a few weeks of lost income could be enough to permanently close the doors of a business.
Think Ahead: Disaster Planning
Generally, commercial property insurance doesn’t cover the costs of this type of disruption. Business owners need to get specific business interruption coverage, which provides for relocation costs, or a temporary closure to make necessary repairs. The company would still be provided with cash flow to make up revenues lost and expenses incurred while regular operations are suspended.
Business owners should consult with an insurance agent before the next disaster strikes. To determine the proper amount of coverage, Filler & Associates can help forecast a worst-case scenario and ask questions to cover all the possibilities. Nobody wants to over insure, but company owners should be careful not to overlook critical risks, such as prolonged or multiple power outages.
This type of insurance isn’t sold as a separate policy. Instead, it’s added to existing property insurance policies. There are two basic types of business interruption coverage:
Named perils policies. These policies only cover whatever specific occurrences are listed in the policy. Any example would be fire or water damage
All-risk policies. These cover all disasters unless they are specifically excluded. Generally these exclusions are damage from earthquakes and floods, but such coverage can usually be added for an additional fee.
Business interruption insurance usually pays for income that’s lost while operations are suspended. It also covers continuing expenses, including salaries, related payroll costs and other costs required to restart a business. Depending on the policy, additional expenses might include:
- Relocation to a temporary building (or permanent relocation if necessary);
- Replacement of inventory, machinery and parts;
- Overtime wages to make up for lost production time; and
- Advertising stating that your business is still operating.
Keep in mind that business interruption coverage that insures against 100 percent of losses can be quite expensive. Policies that cover 80 percent of losses while the business owner shoulders the remaining 20 percent are more common.
The key to business continuity after a disaster is to file the right claims against the business interruption insurance as soon as possible. This type of insurance is arguably one of the most complicated on the market today and submitting a claim can be time-consuming and requires careful consideration.
To avoid having a business interruption claim be delayed or denied, it’s important to be as precise as possible. Filler & Associates can review the records that will be submitted and organize them in anticipation of litigation if the insurer is reluctant to pay your claim. Taking the time to prepare for that possibility, even if it is a small possibility, can save a great deal of effort later.
The calculation of losses is one of the most important, complex and potentially contentious issues involved in making business interruption insurance claims. The insurance company may enlist its own specialists to audit a claim; therefore, it can be extremely helpful to consult an accountant who is experienced in business valuation and litigation support to help prepare the claim, quantify business interruption losses and anticipate questions from the insurer.
These are the major rules Filler & Associates can play in managing the claims process:
Point-person. The accountant can be the primary contact with the insurer, dealing with the typical onslaught of document requests. That way the business owner is free to run the business and bring it back up to speed. Filler & Associates may already have an established relationship with the insurer and know how its claims department works.
Damage estimator. Most policies define losses based on the earnings a company would have made if the interruption hadn’t occurred. To project lost profits, the accountant will analyze, identify and segregate revenues and expenses.
Be A Survivor
No one knows what natural and man-made disasters will strike in 2015. Business interruption insurance can improve a business’ odds of survival. Working with an attorney who can aid in the legal interpretation of the policy, Filler & Associates can quickly and efficiently assemble the information and calculations needed for a viable business interruption claim, resulting in a quick and easy resolution with the insurance company and providing much-needed cash flow to get the business up and running again.