Business Shutdown? Here is how insurance comes into play
Commercial Insurance, Liability Insurance
March 26, 2020
When we face uncertain times we look for answers. There has perhaps never been a more uncertain time than if you are a business owner during a temporary shutdown.
We understand you still have questions about your commercial insurance during a time like this and we hope to answer a couple of the most common concerns for you below.
Note: commercial insurance is not a one size fits all for every business or industry. You must speak to your insurance representative if you have any specific questions about your policy.
WHAT IS BUSINESS INTERRUPTION COVERAGE?
Business interruption (BI) is generally an optional coverage unless it is already included within a package policy offered to specific groups and/or segments by an insurer. The BI is triggered if a business needs to shut down because of an insurable peril. When triggered, depending on what variation of BI coverage is on your policy, it may cover things like continuing expenses or even replaces profits.
3 Most common types of BI policies:
Gross Earnings pays only until the property is repaired or stock is replaced.
Profits Form pays until business resumes normal pre-interruption level (limits) are reached or until the max indemnity period exhausted (whichever occurs first).
Extra Expense is for businesses that can remain operational by re-locating temporarily during periods affected by a loss.
AM I COVERED FROM BUSINESS INTERRUPTIONS DUE TO A PANDEMIC?
Generally speaking, probably not. Typically a business interruption policy does not offer coverage for business interruption or supply chain disruption due to a pandemic. However, some businesses have purchased specialized business interruption coverage which may be triggered when the WHO officially declares a pandemic.
EVEN THOUGH I CLOSED, DO I STILL NEED MY COMMERCIAL INSURANCE?
In most cases, absolutely. Even when your business is shut down you remain vulnerable.
For example, someone could claim to have contracted an illness while at your business before the shutdown. Keeping yourself insured means you are more insulated from risk like this.
Another scenario is that you could be liable for a job you did weeks or months ago with an incident occurring just now as a result of that work you did.
Consider an electrical contractor who did a wiring job 6 months prior that unfortunately had a defect which caused a fire. Chances are decent that when the cause of the fire is determined the building owner may go after the electrician for damages.
Or perhaps consider an accountant who completed a tax return for a client she handled before the shutdown. The client wants to pick up their paperwork so the accountant agrees to meet them at the office even though technically they have closed at this time. While at the office property the client slips on a cracked sidewalk and trips or falls causing what could be a mild to severe injury, you now have a possible liability claim.
No matter what type of business you run, it is very important to maintain your business insurance coverage even if you are not currently up and running. There are still ways you remain vulnerable. We also recommend that you continue to check on any, and all, buildings you operate for your business, even while temporarily closed. This is especially important for businesses with a storefront. Although unfortunate, a closed business can become an easy target of vandalism and break-ins.
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