"Insure" Your Building Survives a Hurricane

When disaster hits, one immediate challenge is to return to normal business operations. Your tenants and your employees rely on it for their livelihood. While hurricanes are extreme examples, even much less severe events can impact the business.

When a building or business personal property is damaged, the resulting financial loss is not limited to the physical damage to the property. The loss of income the business suffers can often be greater than the monetary loss caused by the damage to the property itself. 

Here are the 5 types of insurance to protect against income loss:

1. Business Income Insurance: enables a firm to protect itself against the loss of income suffered because of physical damage to insured property. 

A common example includes losses suffered by property owners and managers when serious property damage (hurricane, fire, collapse) prevents them from collecting rent. This insurance would cover net income plus continuing expenses from the date of the loss to the time that the building should be repaired, rebuilt, or replaced with reasonable speed and similar quality construction.

2. Extra-Expense Insurance: pays the necessary additional expenses the insured incurs during a period of restoration that the insured would not have incurred without damage. 

This insurance pays for:
  • Overtime pay to regular employees for the extra hours worked.
  • Expense of renting suitable temporary space.
  • Cost to ship replacement equipment on an emergency basis.
3. Contingent Business Income Insurance: protects a business from financial loss resulting from damage occurring at their principal customer’s or supplier’s premises. The business depends greatly on selling to one or more large customers or on buying from a large supplier; therefore, if they incur severe damage as a result of an insurable loss, the business that depends on them for economic survival could be financially damaged as well.

4. Accounts Receivable Insurance: compensates business for its financial losses when they it is unable to collect money owed because of damage or destruction to accounts receivable records. This coverage can be included in computer insurance if the records are kept on computers.

5. Leasehold Interest Insurance: protects both the landlord and tenant from financial loss related to the terms of the lease. An example is when the tenant has an advantageous lease situation in which it would have to pay a much higher rent in the open market than the rent it is currently paying. If a severe loss (hurricane or fire) were to happen and tenant wants to leave, the landlord can cancel the tenant’s lease and find another tenant to pay rent at the current higher market rate for that space.

Consider investing in these insurances to ensure your business, building, and tenants are covered in the event of a disaster.

More information on this topic is available from the BOMI International course Law and Risk Management, part of the RPA® designation program. For more information regarding this course and BOMI International’s education programs, call 1.800.235.2664. Visit BOMI International’s website, www.bomi.org.

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