Business Income is a critical coverage for any business. From a grocery store to a restaurant or even a laundry mat – any one of these establishments could be put out of business in the event of a catastrophic loss, especially if they do not have the proper coverages in place. That’s where Business Income can save your company.
One thing many owners might not consider are the ramifications a loss like a fire can do to your business’s bottom line. Every policy should have the coverages in place to rebuild your building or to fully indemnify your loss of personal property, but what about the INCOME you WOULD have made while your building is being rebuilt?
For example, you own a single location grocery that has a BI insurance in place with a cap of $1 million dollars. During your most recent insurance review you find out that this $1 million dollar cap would be grossly insufficient as your annual receipts are closer to $8 million dollars annually. To avoid this, your broker can set you up with a policy that has Business Income on an Actual Loss Sustained (ALS) basis. This removes the “cap” or maximum amount the insurer will pay out to whatever your actual loss is.
Another example would be a 6 location laundry mat based in Chicagoland. They had a $100k limit per location for their BI limits which seemed like enough because the company had around $550k in sales per year. However, after further digging into their receipts we found that one of their locations actually did the majority of the heavy lifting for the company. This location was pulling in $400k(!) of the sales for the company. If this one location burnt to the ground this chain would lose 85% of their income for the year! By changing their limits to Actual Loss Sustained they protected themselves from bankruptcy and ensured that they would be able to maintain their business if the worst situation were to happen.
For a great example BI limits for a restaurant check out this post: http://thebulowgroup.com/when-catastrophe-hits/
BI limits can make or break a business during a major claim, having the proper coverage that fits YOUR business is critical!