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Step 1
Identify the claims process for business interruption insurance. Read the part in the fine print regarding the terms for assessing property damage. Also, evaluate whether the dollar amount of the coverage can sufficiently cover salaries and rent, and whether the premium payments are competitive with other companies.
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Step 2
Compare the prospective company's policy regarding extra expense insurance. In light of a disaster or other reason for closing your business, some policies have clauses for reimbursement beyond the normal operating expenses given during a post-disaster restoration period. Gauge a policy based on how it describes the process for documenting the necessity of continual expenses, such as identifying specific loss of sales or lack of customer traffic. The extra expense insurance alone may provide sufficient coverage, without the purchase of business interruption insurance.
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Step 3
Watch out for bare-bones policies. Look to see whether the policy has an extended period of indemnity clause. A policy that only covers your losses until you can open for business is not realistic. In fact, in most cases, the financial effects of a disaster linger long after the storm has cleared.
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Step 4
Evaluate and compare policies based on the guidelines for off-premises power coverage. A good policy will award benefits if your business is interrupted due to damages to your service providers. A break in the phone lines or loss in power could spur the use of a generator, rental unit or relocation service--all of which should be covered by a policy.
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Step 5
Investigate whether or not you need a co-insurance clause. Compare the cost-versus-benefit tradeoff. In a well-executed plan, any co-insurance clauses will be avoided if an agree-amount endorsement exists. If the policy does require this, the insurance company will generally request you to fill out a business interruption worksheet before it lets you have such an endorsement.
