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Get the help you need while you rebuild your business  

Key takeaways:

  • Business income insurance replaces your income if a covered disaster causes your business to shut down. 
  • It allows you to meet payroll, cover your business’s rent or mortgage, pay taxes, lease a temporary location, cover various other expenses, and get the breathing room you need to rebuild your company.
  • Help starts within 48 to 72 hours. The standard length of aid time is 30 days, but you can add an endorsement for up to 360 days to get back up and running.
  • Some things are not covered like glass breakage, utilities, undocumented income, and viruses, colds, and flu.

Businesses in South Florida certainly know the importance of property and liability insurance, among other important policies. In the case of a catastrophic event like a fire, you’ll breathe a sigh of relief knowing that property insurance will cover the loss of things like computers, furniture, and other equipment. That relief will be short-lived, though, if it means you can’t do business for months and have no source of income. 

Fortunately, there’s business income insurance in Florida. Also called business interruption insurance, it replaces business income in the event of a covered disaster. It can be added to your property and casualty policy or included in your comprehensive policy package as a rider or add-on. Note that business income insurance only replaces income that is lost if business is interrupted because of a direct physical loss or damage. Let’s explore what business income insurance covers, what it does not, and how coverage is determined.

What business income insurance in Florida covers

As mentioned above, business interruption insurance will replace your income in the event of a physical loss or damage. That means if you have a fire, or there’s a covered natural disaster and your building and/or inventory are damaged to the extent that you can no longer do business, your business income insurance kicks in, sometimes after a 48 to 72-hour waiting period. Note that standard policies don’t offer reimbursement if your business has to shutter because of the pandemic. While communicable disease policies are available, you cannot purchase them after the fact. 

It is important to make sure a plan’s policy limits are high enough to cover expenses for more than a few days since many business owners are overly optimistic about how fast they can get back up and running. Your business income coverage has what’s termed a “restoration period,” the length of time that your policy pays for lost income and extra expenses while you are rebuilding. Talk with your insurance agent – a standard policy usually limits the business income restoration period to 30 days, but you can get an extension of up to 360 days through an added endorsement. 

Business income insurance covers:

  • Lost net income based on performance in prior months.
  • Fixed costs of doing business including operating expenses.
  • Temporary relocation. Discuss with your agent – some policies will cover the costs of moving to another temporary location as well as operating expenses. 
  • Retraining costs. In the case of lost machinery, if you have to retrain employees on how to use the new equipment, those costs may be covered.  
  • Extra expenses. Business income insurance often covers things that are outside of normal operating expenses, such as generators, temporary office equipment, overtime wages, and expenses to expedite recovery.
  • Wages. A shutdown means a risk of losing valuable employees. Business interruption insurance means you can make payroll even while you’re rebuilding your organization. 
  • Taxes. Unfortunately, your company has to keep up with taxes, even if you’re temporarily out of business. Having the right insurance means you can pay all of your taxes on time without incurring penalties. 
  • Loan, rent, and mortgage payments. Monthly payments must still be made, even if your company is not generating income. Business income insurance allows you to not fall behind. 

While almost all businesses are eligible for business income insurance in Florida, some businesses, like restaurants, have some inherent risks and those establishments may have to buy a separate policy rather than being able to add business interruption as a rider to their property insurance policy. There also are some things that your business interruption policy will not cover. Let’s take a look.

What your business income insurance will not cover

Business income insurance is pretty comprehensive and offers valuable protection in case of a catastrophic event, but it does not cover everything. Remember, it will only help in the case of a covered event as defined by your comprehensive business policy, so if you don’t already have coverage in place for hurricanes and floods, it is worth a talk with your insurance agent to make sure you have all of the coverage you need to see you through unforeseen events. When it comes to business interruption insurance, the following things are not covered:

  • Glass and other breakage, even if caused by a covered event.
  • Flood or hurricane damage. As mentioned above, these need separate policies. 
  • Income you cannot document. If it’s not listed on your company financial records, you can’t claim it as revenue.
  • Utilities. These are variable costs that are not covered by a business income policy.
  • Airborne diseases. This includes bacteria and viruses such as COVID-19. 

COVID-19 has caused and continues to cause huge losses for businesses. All-risk policies are available, but they are not retroactive, so purchasing a policy like that today would do no good. However, there is legislation in the works. The Pandemic Risk Reinsurance Program would mean that insurers would pay claims and then be reimbursed by the government after the fact. 

Every business owner should have business interruption insurance, especially in South Florida. You know what Mother Nature can do, and without business income insurance, no portfolio is complete, nor is your business really covered. Businesses that recover well after a disaster do so because they prepared, and that includes doing a complete review of your insurance coverage.

The complete coverage you need to protect your business

Life is unpredictable, so it’s important to prepare for any weather or human-caused eventualities. That’s why Avante is always standing by. We’ll work with you to build the complete coverage you need to protect your business, with a deductible that works for you. Reach out today, because you never know what tomorrow will bring. 

This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.