Business Interruption Coverage: Why You Need it and What Should be in Your Policy
By Christopher Bolger Senior Risk Manager, Venture Insurance Programs | March 29, 2015
After a catastrophe befalls your hotel, you are forced to cope with not only the significant costs of clean-up and repair, but the loss of business income when your usual operations are interrupted. In these instances, hotels often lose multiple income streams, from rooms to events to food and beverage.
Hotels are often careful to scrutinize and mitigate the sorts of risks that may shut down business for an extended period of time. After all, no business would think of going without property insurance. However, far too many are not properly insured for the immediate aftermath of a property loss such as a fire or burst pipe. All business tend to underestimate the risk of business interruption and its significant costs.
Business interruption insurance coverage, also known as business income coverage, exists to provide business owners in all industries support while they recover from the unthinkable. Unfortunately, quite a few hotels are underinsured for this coverage. So, why does a hotel need this coverage, and what does it look like in practice? Let's take a closer look at the risks.
Where Business Interruption Coverage Applies
Offered as part of a hotel's property insurance policy or as part of a business owner's policy package, business interruption coverage goes into effect after a covered loss that affects the operation of the business. It covers the loss of net income due to business interruption or suspension and any ongoing operating expenses during that period of time.
It is no exaggeration to say Superstorm Sandy obliterated parts of the Jersey Shore and Long Island. In fact, the devastation was so complete, that authorities kept evacuees out of their neighborhoods and proprietors away from their businesses for weeks after the storm. In some cases, people could not reenter the neighborhoods where they lived or worked for weeks after the storm.