The Importance of Bll

The Importance of BII

Small and large businesses have a lot in common when it comes to business interruption insurance (BII).

Insuring your buildings or equipment is fairly easy to understand – you determine the values for your property and report them to the insurance company. The policy will cover loss that occurs based on the “perils” that are specifically insured. Here are some of the BII issues that small businesses specifically should pay attention to:

• Did you include BII in your policy? It is a separate section that needs to be added to the policy – it is not automatically included.
• Valuing loss. BII insures your “loss of profits” – how do you value the loss in a growing or shrinking business?
• Will you have to pay your employees while your building is being rebuilt? You could lose valuable employees if you do not continue their income – this is called “ordinary payroll” and needs to be specifically included in your policy.
• What “perils” are covered? Your BII covers only perils that are on your property policy – what about earthquake and flood losses? If you have a loss because “access to your property is denied,” are you covered?
• How do you prove your loss? What “profits” would you have lost during the period when you were out of business? Should you agree with the insurance company before a loss happens?
• Loss of market share. What about “loss of market share” will you possibly never be able to recover? How is that insured?
• Business interruption. What if one of your major “customers” or “suppliers” has a loss that causes you to lose profits? This is an area that you need to specifically address.
• Covering extra expenses. You may want to include coverage for “extra expenses” that you may incur to keep you in business, like the rent on a temporary replacement building to keep your business operating.
These are just a few areas that a small business should address. Each organization has different needs. Have an adviser help you think through your coverage needs.

Karen Stern (314-983-1204 or kstern@bswllc.com) is partner in charge of BSW Small Business Services, which provides small business taxand accounting services.