Out of Business

Ash spewing from an Iceland volcano halted air travel and countless business meetings and deals across Europe.

In Times Square, hotels and businesses were shut down after a bomb was discovered in an abandoned car along Broadway.

All around the Gulf Coast, fishermen, motel owners, restaurateurs and other small businesses were fearing the impact on their futures of the Deepwater Horizon oil spill.

Historic flooding in the music capital of Nashville closed the downtown, including Opryland, which might not reopen for several months.

In California, wildfires routinely wreak havoc on homes and businesses, especially when roads are closed and areas are evacuated to keep people safe.

Larger businesses affected by the spill may have emergency plans and insurance in place to cover losses resulting from this man-made disaster. But what about the small businesses along the Gulf Coast and all the businesses they supply?

While businesses away from the coast might not suffer property damage, business income losses are sure to add up as the migration of the oil impacts ports and shipping lanes, including those along the Mississippi River. Indeed, while a manufacturer in Seattle may be far removed from the events unfolding in the Gulf, the trouble hits close enough to home when shipping is interrupted to the point where his products can’t get out and his suppliers can’t get their wares to him.

Insurance won’t always have the answer – there are conditions, exclusions and waiting periods, and the recent events would not necessarily trigger coverage. But ignoring the risk is also not an answer.

One of the very first topics Insurance Journal’s resident insurance expert, author and educator Christopher J. Boggs discussed at length was business income coverage. Not so much the coverage – although he knows that inside and out – but more about how bothered he is that so few business owners buy it.

Boggs, director of the Insurance Journal Academy of Insurance, in his timely new book, “Business Income Insurance Demystified,” notes that almost one-third of businesses that are shuttered by a property disaster such as a serious fire never reopen, or they close soon after the event. Without income, no business can survive very long.

Business interruption insurance covers profits that are lost and continuing expenses such as salaries, rent and utilities when a company is forced to shut down by a disaster, or even by an event such as an extended power outage.

Boggs believes that insurance agents and brokers too often either fail to sell or they improperly structure business income coverage, setting up their clients for business failure following a major loss.

In effect, while not buying business interruption insurance is one of the biggest mistakes small businesses make, not correctly selling business income protection is probably one of the biggest mistakes agents can make. Employers rarely think about their business not being able to open; they need agents to remind them.

Perhaps we should all grab a copy of Boggs’ book available in the bookstore on www.insurancejournal.com – and brush up on business income. Then ask our business clients if they’ve seen the news lately.