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What are the most important factors to consider when choosing a business interruption insurance policy?

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Business interruption insurance is a type of coverage that helps you recover lost income and pay for extra expenses when your practice is affected by a disaster, such as a fire, flood, or pandemic. It can be a lifeline for your business continuity and financial stability, but not all policies are created equal. Here are some of the most important factors to consider when choosing a business interruption insurance policy.

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Chris Cox

Tired of never seeing your insurance broker and just getting your renewal notice appear in your inbox. I provide a…

1 The scope of coverage

The scope of coverage refers to what events and scenarios are covered by your policy, and what are excluded. For example, some policies may only cover physical damage to your premises, while others may also cover disruptions caused by civil authority orders, supply chain issues, or cyberattacks. You should look for a policy that covers the most likely and relevant risks for your practice, and avoid any gaps or exclusions that could leave you vulnerable.

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Chris Cox

Tired of never seeing your insurance broker and just getting your renewal notice appear in your inbox. I provide a personal service and I make the effort to come and see you to learn about your business.
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Every business is different and have different operating models. Most large SME's have their own financial controller or engage the services of an accountant. I say this because it's important that the correct gross profit figure be used in the calculation, and it must be not today's figure but an estimate on the next 12 months.

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2 The amount of coverage

The amount of coverage refers to how much money your policy will pay you in the event of a business interruption. This depends on several factors, such as your gross income, your fixed and variable expenses, your deductible, and your coinsurance. You should calculate your potential losses based on different scenarios, and choose a policy that provides enough coverage to meet your needs. You should also review your coverage regularly and adjust it as your practice grows or changes.

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3 The period of coverage

The period of coverage refers to how long your policy will pay you for your lost income and extra expenses. This usually starts from the date of the disaster and ends when your practice resumes normal operations, or when the policy limit is reached, whichever comes first. However, some policies may have a waiting period before the coverage begins, or an extended period of indemnity that covers you beyond the restoration of your practice. You should consider how long it would take you to recover from a business interruption, and choose a policy that offers a reasonable and sufficient period of coverage.

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Catherine G. Turner

Catherine Gail Turner, Financial Purse Strategist dedicated to helping women entrepreneurs implement financial purse strategies to leave a legacy and build wealth!
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By definition, insurance is simply an exchange of risk. Having said that, I don't believe that insurance should be expected to cover 100% of one's business continuation, but rather a reasonable portion. Businesses should consider what portion of their profits will be allocated to creating reserves for the unexpected. That way, the reserves can cover the immediate risks until the waiting period is over and the insurance kicks in.

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4 The cost of coverage

The cost of coverage refers to how much you have to pay for your policy, either as a premium or as a percentage of your gross income. This depends on several factors, such as the scope, amount, and period of coverage, as well as the risk profile of your practice, the location of your premises, and the claims history of your insurer. You should compare different quotes from different insurers, and look for a policy that offers the best value for your money. You should also consider any discounts or incentives that may apply to your policy, such as bundling with other types of insurance, or implementing risk mitigation measures.

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5 The terms and conditions of coverage

The terms and conditions of coverage refer to the fine print of your policy, which specifies the details, definitions, limitations, and exclusions of your coverage. You should read and understand your policy carefully, and ask your insurer or broker any questions you may have. You should also be aware of your obligations and responsibilities under your policy, such as notifying your insurer of a claim, documenting your losses, and cooperating with the investigation. You should also review your policy periodically and update it as needed.

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David Gates MD MBA PhD FACP SFHM CPE

CEO at Portal Consulting LLC | HIT Expertise, Physician Leadership
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Without knowing the terms, business interruption insurance is basically worthless. It needs to be tailored to the risks which are indigenous to your institution. paying a premium for risks, which aren’t really relevant to your facility suggested wasted resource. On the contrary, if you can obtain insurance, which is appropriate to the risk profile, it can’t have value.

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6 The reputation and reliability of the insurer

The reputation and reliability of the insurer refer to the quality and credibility of the company that provides your policy. You should look for an insurer that has a solid financial rating, a good customer service, and a fair and timely claims process. You should also check the reviews and feedback of other policyholders, and consult with your peers or professional associations for recommendations. You should choose an insurer that you trust and that understands your practice and your industry.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the most important factors to consider when choosing a business interruption insurance policy?

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2

3

4

5

6

7

1 The scope of coverage

2 The amount of coverage

3 The period of coverage

4 The cost of coverage

5 The terms and conditions of coverage

6 The reputation and reliability of the insurer

7 Here’s what else to consider

Practice Management

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What are the most important factors to consider when choosing a business interruption insurance policy?

1

2

3

4

5

6

7

1 The scope of coverage

2 The amount of coverage

3 The period of coverage

4 The cost of coverage

5 The terms and conditions of coverage

6 The reputation and reliability of the insurer

7 Here’s what else to consider

Practice Management

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