Orlando, Florida—Now that the novel coronavirus has been declared a global pandemia, do you have a back up plan to recover from business interruption?
At first, we all hoped this was not going to last long, and therefore not threatening to our daily lives and business operations. For those businesses in the restaurant industry, as well as transportation, like taxi drivers, and Uber drivers among many others, reassuring customers about sanitizing steps, and cleanliness is the new normal. Plus, as a business owner, you carry a big responsibility on your shoulder knowing that your employees are counting on you to make sure they sustain their wants and needs as well.
As health authorities work to contain the spreading coronavirus (COVID-19) and organizations bolster resilience plans, questions often arise about whether insurance would cover COVID-19 losses. The short answer is, “It depends.”
Many business owners assume that the Property Insurance they already own will cover the loss of revenue, but that may not be the case. While Business Property Insurance covers the value of physical assets, it does not cover the lost revenue potential.
Did you consider a business interruption policy at the time you were purchasing insurance coverage for your business?
A good agent must have advised you to do so. This coverage insures the revenue losses that your business might suffer in the case of a disaster. Many business owners assume that the Property Insurance they already own will cover their lost revenue, but they’re wrong.
A Business Interruption Policy will typically cover:
- Net income that your business would have earned or incurred.
- Continuing normal operating expenses
- Extra expenses incurred during the restoration period.
- The cost of actions taken for loss mitigation.
Keep in mind that Business Income/Business Interruption insurance only responds from a covered cause of property loss, which is usually caused by physical damage, not outbreaks.
Business interruption insurance policies were more permissive in the past. But after other viral epidemics — such as SARS in 2003, Ebola in West Africa starting in 2014 and Zika, most recently in 2015 — insurance companies realized that business-interruption claims could become unwieldy if they covered shutdowns tied to outbreaks of disease. If you have insurance policies on your business, that are meant to kick-in when disaster strikes you may want to verify how or if it will cover losses incurred because of the recent outbreak.
According to the Organization for Economic Cooperation and Development, if the coronavirus continues to spread, it could cut the year’s global growth by half, to 1.5 percent for the year instead of the forecasted 2.9 percent. The only thing we’ve ever had which was bigger than that was the banking crisis when the credit markets seized up and governments had to bail out banks and other institutions.
Issues such as COVID-19 and other events emanating from external environments should encourage a thorough risk review at an enterprise level to evaluate the impact to an organization’s employees, physical assets, brand and balance sheet. Factors that will play a role will include an organization’s industry, the business philosophy around risk mitigation, pricing and coverage available from each respective insurance market.
If you own —or may be considering to start a business in the states of Florida, Georgia or Texas, Garzor Insurance offers you insurance options that grow with your business. Compare the offerings from different insurance carriers, and save. Contact us for an initial consultation (321) 206-8035!
Yaralyn Diaz, CSR
Commercial Lines CSR