The food and beverage industry has seen a steady increase in losses due to natural disasters, such as hurricanes, tornadoes, floods, and earthquakes. It’s a problem that’s not going away. Over the next decade, climate change is expected to cause a $2 trillion reduction in workplace output and productivity.
Natural disasters can cause significant disruptions to businesses’ operations, resulting in lost sales, damaged inventory, and even employee injuries. Business Interruption Insurance protects against losses such as fire, theft, or natural disasters.
Keep reading for an overview of Business Interruption Insurance coverage and its benefits for the food and beverage industry.
What is Business Interruption Insurance?
Business Interruption Insurance, also known as Business Income Coverage, replaces lost income when a business is affected or shut down by a covered peril. This type of policy is a common inclusion in a Business Owner’s insurance policy. Business Interruption Insurance is not sold as an individual policy. Instead, it must be added to a different policy, like Commercial Property or General Liability insurance.
Business Interruption Insurance provides payment and reimbursement in several ways, depending on the coverage. A typical policy includes coverage of lost profits due to business closure. The insurance company analyzes historical financial statements for your business and determines the proper reimbursement.
Business Interruption Insurance also covers lost wages for you and your employees while your business is closed. This policy also pays any fixed costs your business may experience during the closure, such as rent, utilities, loans, and tax payments. The best part is that this insurance policy can be adjusted to every business’s unique needs and risks. Overall, Business Interruption Insurance is designed to replace lost income and restore the company to its pre-incident condition.
How to Determine Coverage Needed for Food & Beverage Companies?
As a high-value industry, businesses within the food and beverage industry need to take precautions to protect themselves and their employees. Business Interruption Insurance is one of the best ways to protect your food and beverage company from unforeseen loss. All insurance policies have coverage limits, and Business Interruption Insurance is no different. It can be challenging to determine how much coverage your business needs.
The best place to start determining how much coverage your food and beverage company needs is by envisioning a one-year closure. Hopefully, your business will be up and running before the one-year mark after an incident, but this is a good baseline.
Review historical financial records to determine an approximate annual net profit. Assess your annual payroll needs, debt payments, and any other fixed expenses that would need to be paid should your business shut down. Remember to take into account the lead time that it will take to get the customized equipment for your manufacturing lines. Additionally, request an appraisal of the physical location of your business. This amount will determine how much it would cost to rebuild your building from scratch. Combine these numbers to determine the minimum amount of coverage you should purchase.
Awareness of all clauses in your Business Interruption Insurance policy is essential. Go over every policy detail and ensure you fully understand your coverage, including costs and perils. Most Business Interruption policies have a waiting period between the time of the incident and when coverage starts. This period, called the restoration period, is typically between 24-72 hours long.
These steps may seem daunting and time-consuming, but getting the right amount of Business Interruption coverage for your food and beverage company is essential to protecting your business. If you want to learn more about Business Interruption Insurance and other policies critical to the food and beverage industry, reach out to a professional broker like Coughlin Insurance. We are experts regarding insurance needs for members of the food industry.
Need business insurance? We’ve got you covered!
At Coughlin Insurance Services, we believe that our customers should be valued and taken care of. We aim to provide quality service and meet the needs of our clients by providing businesses, including those in the food industry, with the insurance they need to protect their assets. If you’re a business looking for insurance, don’t hesitate to reach out for a free insurance quote today!
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