If your practice closes because of a fire and you're unable to practice for several months, will your lost income be covered by insurance?
by James West in Business Insurance on Wednesday, June 17, 2015
Most D.C.s understand the need to protect their property in case of a disaster like a fire. But have you considered how you would keep your practice open if you continue to have expenses but no income?
Business Income Insurance
This is designed to replace income your business would have incurred had no loss occurred. Business income is generally defined as the net profit or loss before taxes, plus continuing normal operating expenses, including ordinary payroll (payroll for employees other than officers, executives, department managers or employees under contract).
Coverage is generally limited to the loss of income sustained until the property is restored, and/or a specific timeframe following the loss.
Specific Items to Consider:
- It’s important to review ordinary payroll annually.
- Review your projected timeframe for resuming business. After a major loss, getting up and running takes much longer than you may anticipate and can cost much more, too.
- You may be back in business but your customers may be going to your competitor. An Extended Period of Indemnity extension may be necessary to give you more time to restore your business to pre-loss level.
Extra Expense Insurance
This is designed to pay for necessary expenses incurred during the period of restoration of the property. Extra expenses include those necessary to continue operating the business at its original location or at a temporary replacement location until the original location is repaired.
Specific Items to Consider:
- Not all businesses would lose customers after a major loss. For example, a law firm would retain its clients, and there would still be a flow of revenue; however, the costs involved in renting new office space, moving, and hooking up new phones and computers is considerable. Transitions are more expensive than you think. Increased rent, employee overtime and moving costs are examples of extra expenses that service organizations should consider insuring.
Many business owners fail to consider how they would manage if a fire or natural disaster rendered their business premises temporarily unusable. According to the Federal Emergency Management Agency (FEMA), 40 percent of all businesses that close down following a disaster never open again.
If You Share Office Space
If your business is set up as a sole proprietor, LLC, PLLC, Professional Association or corporation you will need your own business owners insurance policy in place to be properly insured in the event of a claim. This is also true of business income insurance.
Often, D.C.s who share space (with each other or another business) believe they are covered by another's insurance policy. The truth is, you need your own insurance policy even if you share space.
Each separate business entity needs their own insurance policy in place to be covered correctly.
For additional information or to discuss these coverages, contact one of our experienced agents at 800-769-2000, ext. 8180 or firstname.lastname@example.org.