BUSINESS INTERRUPTION INSURANCE-DEATH PROTECTION FOR A BUSINESS

Rough Notes, Jul 2005 by Zinkewicz, Phil

Surprisingly, the survey found that more than half (54%) of small business owners did not have any business interruption insurance. What is even more surprising is that another 20% of business owners said they weren't sure if they had the coverage or that they had never heard of the coverage. Only one out of four (26%) said they had the coverage. Among those business owners who said they don't have business interruption insurance, 45% said they didn't think they needed it; another 19% said it was too expensive; 16% said they didn't know about it; and 13% said they were "unsure."

From a financial security standpoint, business interruption coverage is key, says Flannagan. "Businessowners policies, or BOPs, cover loss of income and certain extra expenses for 12 months. BOPs often provide 60 days of coverage for ordinary payroll. BOP eligibility typically is based on the type of business, size of building, and/or amount of revenue. Eligibility varies from one insurer to another, but more than half of all commercial risks are eligible. Agents should consult with their small business customers to ensure they have the package they want to match their situation. Other industry statistics have shown that 85% of small businesses are underinsured by 40% to 50%. Of those businesses that suffer a serious loss, almost half never reopen. And, of those that do, more than one-fourth close within three years. Business interruption insurance can help protect small businesses from that fate," says Flannagan.

Asked whether independent agents and brokers should bear some of the blame for the lack of interest in business interruption insurance, Flannagan said that, while common sense should tell insureds that business interruption is a necessary product for small businesses, the product is still a "tough sell." Said Flannagan: "Most agents do try to sell the product, but too often a small business owner doesn't want to incur the extra premium expense. When this happens, most agents ask their insureds to sign a statement to the effect that they were offered the coverage so that there is no danger of an E&O lawsuit later on down the line."