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I wish I heard this question more often: Do I need business interruption insurance?

The answer is simple: No, unless you can’t afford to lose all your key employees, go indefinitely without income, pay all your ongoing expenses when your business isn’t making any money and go out of business as you wait for repair or reconstruction of your business premises. Otherwise, the answer is yes, you do need business interruption insurance.

Business interruption insurance (also known as business income insurance) is a form of property insurance. In this case, we’re referring to the property more affectionately known as your business revenues and expenses. As a concept this type of insurance is pretty straightforward. The main idea is to provide money for net income and ongoing expenses when your business can’t, usually because some form of covered loss makes it impossible.

For example, let’s say you operate a candle shop. One morning that temp you hired for the holidays moves a cinnamon-apple pillar candle beneath a silk bamboo plant that catches fire, which spreads to a nearby tapestry and quickly converts your entire business to a wax works before you can say, “Did someone burn an apple pie in here?”

Fortunately, your property insurance will pay to replace the tapestry, the silk bamboo plant, your inventory of candles as well as the cost of needed repairs and reconstruction. Your liability insurance will pay for incidental damage to nearby persons and property. But you’re still looking at an extended period of time during which you have no source of revenue to make your monthly loan installment, pay utility bills, equipment leases, your own salary and other expenses that don’t go away just because your business is down. That’s where business interruption insurance comes in.

Where all of this gets confusing, even for insurance representatives, is where you decide how much business interruption insurance you need. The answer really depends on your business financials. In fact, you might even want to consult a CPA before you decide. But the limit of coverage and the deductible are always expressed both in terms of time and money. For example, you could purchase a quarter of your annual qualified expenses to be paid over a period of 90 days with a deductible of three days.

Most insurance reps will carefully avoid suggesting or speculating about whether any given limit of coverage is “enough.” First, unless they’ve seen your books, they really don’t know. Second, plaintiffs lawyers make their bones on mistakes like that. What we can do is provide you with a worksheet that’s designed to help you separate qualified expenses from costs that don’t continue, such as non-essential services and payroll.

Here’s another question: Do I need business interruption insurance in Florida? The answer is the same. Yes, but if your property insurance does not cover losses caused by wind and hail (also known as hurricane coverage) your business interruption insurance won’t either. In other words, you get exactly nada if a Cat 3 forces you out of business for a while. Keep that in mind when your representative asks about “ex-wind” property insurance.

Keep this in mind, too. Business interruption insurance kicks in when your business premises goes down, as a result of a covered cause of loss, and takes your business with it. What happens if your business premises aren’t damaged but access is severely restricted or denied to a point where the material affect on your business is the same? For example, let’s say a flood cuts off all the roads to your shop. In that case, you will want to have made sure your policy included so-called civil authority coverage and ingress/egress coverage.

Be sure to ask your representative for details. And while you’re at it, ask about extra-expense insurance, too. This is especially true for service businesses, such as dentists and lawyers, which can operate from a different location as they wait for their original premises to come back on line. Extra-expense coverage pays the costs of relocating to a temporary location.

Give me a call (727-916-7429) if I can help. Meantime, keep those candles away from the silk plants, please.

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The other shoe is falling

This comes as no surprise. We’re all accustomed to the sight of empty and abandoned homes. Coming soon: more see-through strip malls.

What else is new? When their customers go broke, lose their homes and cut spending en masse, small business tends to follow suit.

If you’re in the commercial real-estate business, may we offer our deepest sympathies and suggest that you check the vacancy provision in your commercial property insurance policy. You might discover that it defines your property as “vacant” when less than 31 percent of total square footage is rented or used by the property owner for customary business operations.

That’s not a big deal, unless your commercial property remains “vacant” for more than 60 consecutive days. In that case your insurance company probably won’t pay for loss or damage caused by vandalism, water damage, glass breakage, theft or attempted theft.

Maybe you already knew that. Do you also know that what your insurance company remains willing to pay for loss or damage to your vacant property is automatically reduced by 15 percent?

What to do? Maybe nothing, except continue to pay the premium on your existing policy and keep a close eye on your property. On the other hand, if you weren’t aware of this and we’ve managed to add another brick of worry to your wall, consult a good commercial-insurance agent to discuss your particular situation.