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The coronavirus pandemic is spreading throughout the world, wreaking economic havoc as it goes. As citizens are being urged to limit their social interactions in hopes of slowing the spread of the virus, many businesses are closing or reducing operations. The stock market has been falling in anticipation of declining economic activity that, depending on who you listen to, may result in anything from a short lived slowdown to a full fledged depression.
It’s the rare business that would choose to operate without property or casualty insurance, protecting the owner against losses to life and or real property. A product known as Business Interruption insurance is usually an add-on product to many business policies. Business Interruption Insurance can cover lost revenue resulting from a closure or disruption of your operations. Disruptions can take many forms. If, say, a fire broke out in your place of business and destroyed your equipment, Interruption Insurance can cover lost revenue until you get back up and running. However, you need to closely read your policy in order to determine which events will be covered under your policy and what type of events may be excluded from coverage.
Business Interruption Insurance typically usually results from physically damaged or destroyed property or equipment, which renders a business unable to conduct operations for a period of time. Often, there is a time threshold that must be met before coverage kicks in. In other words, a business must first suffer a minimum of perhaps a week or two of operational downtime before indemnification begins. It depends upon the details of the particular policy.
That’s a great question and one that you should be asking your insurance carrier now. Unfortunately, government programs are adapting and changing quickly now so health insurance companies may not even have all the answers yet, but a free quote from multiple insurance carriers and your own due diligence contacting your insurance agent can go a long way toward eliminating the uncertainty and protecting your family from any potential costs of corona virus medical coverage.
Losses from the 2003 Severe Acute Respiratory Syndrome, or SARS, outbreak caused many insurance companies to rewrite their standard business policies to specifically exclude economic losses resulting from communicable diseases. Now, coverage for losses stemming from epidemics or pandemics needs to be specifically negotiated as part of your overall coverage.
Some State and Local governments are now enacting emergency measures including government backed SBA loans at minimal interest rates and terms as long as 30 years to help support businesses disrupted by the corona virus outbreak. Your own insurance policy may also include some measure of coverage for any losses and you should definitely contact your insurance agent to discuss these programs.
Perhaps best of all, the federal government is already promising to step in and help make small business owners whole, with programs and government backed insurance subsidies that will likely stretch well above a trillion dollars as well. Help is on the way for you and your business because your insurance company does care about your continued success.
In order to recover losses from a disruption, an insured business with proper Interruption Insurance must meet the criteria in its governing policy. Generally, those criteria are that insured property is damaged; the causal agent of the property must be explicitly covered in the policy, and you and your insurance provider must be able to quantify the loss. In addition, your policy may spell out whether the losses will be covered for the full duration of your business cessation or for a fixed period of time. Read your policy carefully for full details.
As mentioned, generally, business interruption coverage indemnifies you for economic losses stemming from physical damage to your own property. However, a related insurance product called Contingent Business Interruption coverage may provide relief if you suffer losses from links in your supply chain. For example, if a fire or flood disables a business partner which, in turn causes you to experience economic losses, you may be covered provided you yourself have coverage of the peril that caused your partner’s loss - in this case, fire or flood insurance. Contingent coverage is closely related to the types of coverage you have in your own policy so it should be seen as a matter of negotiation between you and your insurance provider.
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