Every so often, especially in Oklahoma, the weather will wreak havoc on businesses and homes. Whether it's a tornado or an ice storm, Oklahomans know to be prepared for unpredictable weather.
What is Business Interruption Insurance?
For businesses, one of the most important preparations for inclement weather is having insurance that will cover expenses and losses. This can be called a variety of things. Commonly it's known as business interruption coverage, or business income and expenses insurance.
This insurance covers the cost of expenses and lost income from unforeseen disasters. It includes overhead such as rent and paying employees. Those disasters could be weather-related, but they could also include things like a fire, or a drunk driver crashing into your office.
How does this play out?
Take Top Golf, for example. We don't insure them, but we think they're a welcome addition to the local economy.
Bad weather came
Recently, a large storm with ice, freezing rain, and snow caused an accumulation of ice on the nets at Top Golf. This made the netting very heavy. When wind speeds picked up, the poles holding up the netting couldn't handle the force and started snapping.
Not only did Top Golf have structural damage as a result of this storm, but they also lost about two months' worth of revenue, since they were closed for repairs.
What it cost them
The cost of replacing the netting and poles might be covered under standard insurance, as part of a policy discussing snow and ice. While those visible costs are significant, the greater cost in this example would come from what you can't see.
Top Golf lost millions of dollars in potential revenue while they were closed, and they still needed to pay their employees so they could retain them.
We can cover this
Those are the kinds of costs covered by a business interruption insurance.
Two Questions about Interruption Insurance
Conversation about business interruption insurance brings up a few questions, typically. Here are two of the most common.
1. What if you can't generate income?
So, why not just stop paying your employees, or let them go, if your business can't generate income?
If, as a business owner, you know that you would be able to hire and re-train employees within a month, then it might make more sense to let employees go when your business is closed due to a disaster. Certainly, if you stop paying them, you may as well consider them gone since they will be looking for other employment.
But for most businesses, it would take about 3-6 months to hire all-new staff, and another 3 months to train them. Many owners find that it is more practical to pay employees in order to retain them while the business is closed than it is to hire and train a new team.
My personal belief is that as a leader of a company you have the duty and responsibility to protect your team.
2. Who needs Business Interruption Insurance?
Businesses in the restaurant, retail, or entertainment industries would benefit from this insurance. If your work can easily be done remotely, or if you have only one or two employees, this insurance is probably not necessary for you. But if you have a staff of about 20-30 employees this could be a good fit for you.
For many businesses, having physical damage to their location would mean a significant loss of income and it would make sense for those businesses to have this kind of policy.
Not every insurance agency offers business interruption insurance, but many do. It's not the most expensive part of a business's policy, but it could save a lot of money in the long run. We offer business interruption insurance as an option to our clients, and if you'd like to have a conversation about this policy, feel free to give us a call.
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