Material losses, withdrawing investors, lost supplier ties—these are dreadful problems every small business faces following a disastrous calamity. Most have secured business interruption insurance policies to cover for income loss while trying to get back on track. But others end up in utter disappointment as their claims are reduced, if not denied.
The tendency is to immediately seek legal measures to resolve the situation. The focus on restoring the business is diverted as monetary resources are exhausted on the lawsuit. But in the end, there are only two possibilities: the claim being awarded or the efforts ending up futile.
This doesn’t have to happen to you if, in the first place, you are being mindful of the agreement you’re getting into. Here are common contentions in business interruption insurance claims:
Underestimating Indemnity period
The Indemnity period is the length of time you’ll need to restore your business. It begins when physical loss occurs and ends as the effects of physical damage to the business cease or the indemnity period chosen expires whichever is the earliest. The usual mistake here is underestimating the time needed to reinstate the premises, replace equipment and stock, and regain customers. The policy should adjust to the period–that is, it doesn’t expire before restoration ends.
Not considering budget fluctuations
Extra expenses such as increased cost of working are often incurred to minimise loss. Ideally, it should become part of the loss, but the intent of doing so may be questioned. To avoid this, make sure that the rationale and the costs are properly documented. Insurers will allow you to spend a $1 to save a $1 during this process however additional costs have to be insured separately under the policy.
Failing to analyse all possible causes of loss
For the policy to take effect, the insured must be able to establish that lost production was due to the cause of the business interruption (e.g. property damage). Keep in mind, though, that other possible factors influencing production and sales will also be taken into account.
Poor accounting records
Aside from business history, computation is also based on revenue and expenses. Incorrect, inaccurate, or out-of-date accounting records result into discrepancies in data, putting your claims into question. Make sure that pertinent documents such as income statements, sales records, and forecasts are correct.
Depending on the broker too much
An experienced insurance broker ensures that you are well-informed of the gaps or exclusions on the coverage, but you also have to be proactive. Don’t rely solely on what’s presented before you. Do your research on what the insurance company says about the insurance coverage. Providers of business continuity insurance in Budinna like Insuring theProduct, for instance, provide useful guides through the Internet and upon request.
If structured correctly, such a policy will protect your business’s viability. Research religiously, study the coverage carefully, and document properly to avoid hurting your chances and to relieve yourself the hassle of filing a suit.
(Source: Business Interruption Insurance: The Importance of Understanding the Cover, Hfw.com)