Exploring the benefits of business interruption insurance

When a disaster interrupts a business’s operations, the aftereffects can be devastating.

Obviously, most companies cannot afford to be without an income stream for very long. When an event such as a fire or explosion shuts down a business for an extended period, a company’s future is threatened as it risks losing both its customers and its employees to competitors.

The Federal Emergency Management Agency (FEMA) estimates that 25 percent of businesses fail to reopen after disasters.¹ This grim statistic underscores that many companies aren’t financially prepared for unexpected business interruptions and are unaware of business income insurance products designed to help protect them.

“While many business owners recognize the importance of insurance to cover disasters such as fire and windstorms, very few recognize the importance of business interruption (BI) and contingent business interruption (CBI) insurance,” says Bart Shachnow, Sales Performance Director at Zurich North America. “And even among those who do, many are underinsured.”

BI and CBI insurance can be the difference between a business surviving and failing. BI insurance replaces lost income due to damages covered under the business’ property insurance policy. CBI insurance replaces lost income as a result of damage sustained by a key supplier or source of business. For example, consider a restaurant in a mall that depends on customer traffic from a nearby anchor tenant. Should that major retailer sustain a disaster that temporarily halts its operations, the restaurant could be indemnified if it has an appropriate CBI policy in place.

To help brokers understand the complexities and nuances of BI and CBI insurance, Zurich Academy for Select Brokers® is introducing a three-hour/three-credit continuing education-accredited program, “Advanced Concepts in Business Interruption Insurance.” It is designed to provide brokers with a solid, comprehensive understanding of BI and CBI products, including a review of the worksheet used to properly formulate insurance coverages. The program is delivered “live” to our Select Broker colleagues by our BI and CBI specialists, and allows for ample interaction as well as a helpful Q&A session.

“This program will help brokers design an adequate BI and CBI program for a client, which requires a careful analysis of the company’s historic and projected income stream, as well as the identification of expenses that are expected to continue while the business is being restored,” Shachnow says.

The program also outlines how to identify and calculate additional expenses needed to maintain ongoing operations. Such extra expenses might be used, for instance, to hire additional replacement workers, subcontract out for manufacturing facilities, or even to increase advertising and promotional expenditures to retain and/or win back customers.

BI and CBI are critical insurance coverages that can help your clients survive unexpected business interruptions. For more information about this new program, and how your office can enroll, contact Bart Shachnow.