Business Interruption / Time Element Coverage

This type of loss can be one of the hardest to prepare for. While the insurance policy provides for replacing buildings and property damaged in a loss, what about the time that your business is closed to make these repairs? How do you pay for this? Just because your business is closed does not mean that all of your expenses stop. The cost of materials may be saved while production is stopped and many employees will not have to be paid during an extended shut down, but some key employees will need to continue working to prepare for reopening. If there are loans outstanding, interest will still need to be paid and some contracts will still require payment, such as advertising contracts. Another issue that you could be facing is obligations to major customers that can no longer be met. What if your largest customer accounted for 50% of your sales? Assuming that they cannot wait around for you to reopen, they will find another source for the product that you are supplying them. There is no guarantee that they will come back to you once you are up and running again. There is coverage available for all of this. A good disaster plan along with carefully planned insurance coverage will go along way to assuring that your business will survive.

A direct loss to your business is not the only way that this coverage can help protect you. Let’s say you run a toy company and you rely on a manufacturer in Japan for a key component in your best selling toy. As we have recently seen, Japan is susceptible to major earthquakes. Your provider’s building has been severely damaged and you can no longer assemble your best-selling toy until your provider is up and running or you can find an alternative supplier. With this coverage and the proper endorsements, you will be able to survive this interruption in production, even if you are able to find a temporary replacement and the part costs substantially more. It is very important to review this coverage and your possible exposures to losses and choose a limit that will provide you with the best possible protection.

If you think that your business might be vulnerable to such a cash flow interruption, we should talk about the programs available to protect you. We can help you decide the level of protection that you can feel comfortable with. Give H&K Insurance a call at 800-890-5606 or email us.

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