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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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Floridians living in igloos? What next, flip-flops for Eskimos?

I don’t know but maybe it’s not a bad idea (igloos that is), given the cost of homeowners insurance and the generally demented state of Florida’s property-insurance market.

This piece in the Tampa Bay Business Journal makes me think there could be an opportunity for Florida home builders in knocking off an idea pioneered by American Business Continuity Domes, especially if it helped their customers save a bundle of cash on property insurance.

ABC Domes are big, weather-resistant bunkers designed to house data centers for businesses that prefer not to see their servers scattered about the landscape after tornadoes and hurricanes rip through town. They feature solar backup generators and other self-sufficiency provisions to keep companies up and running through and after destructive weather events.

So, if companies are willing to pay to house their data in concrete igloos in Florida, of all places, why not house people in something along the same lines?

I’m not suggesting that there’s a market for windowless, concrete igloos in Florida. I’m just saying maybe people would buy houses with radical new designs that don’t function as mainsails in a windstorm.

I think it was Albert Einstein who defined insanity as expecting a different result by doing the same thing over and over again. Something like that, anyway.

I’m just sayin.

Out for a jog down a virtual rabbit trail this morning, I stumbled upon a blog post urging folks to shop hard for cheap homeowners insurance in order to minimize their monthly payments.

Despite my intuition that this post could be more advertisement at heart than helpful hint, only a fool would argue with the fundamental premise.

Shop around, by all means, and do it online where you can gather more info in less time. But buyer beware. Recognize that buying homeowners insurance isn’t like buying bananas, or televisions or even car insurance. A cheaper rate doesn’t always buy the right coverage.

Insurance-sales sites, and representatives, too, will tweak homeowners policies to make their quotes look cheaper than their competitor’s. This is perfectly legal and it’s actually to the buyer’s advantage, as long as the buyer understands important differences well enough to make a wise decision. For example, do you know the difference between ACV and RCV and its effect on the amount you collect from a claim? If not, consult a local agent before you buy.

Web sites are great for quoting rates but not for explaining arcane differences between coverages and even less for relating these differences to your specific situation. For this you really need to spend a few minutes with a trustworthy local agent.

A common tactic used to make one insurance policy look cheaper than another involves higher deductibles. In Florida, the standard deductible for all other perils (excluding wind and flood) is $1,000 but you can save money by increasing it to $2,500 or $5,000.

A less commonly known tactic is to quote a policy using “Actual Cash Value (ACV)” instead of “Replacement Cost Value (RCV).” This one can be a real heart-breaker, if you aren’t prepared for the consequences.

If your property is covered for actual cash value, it means you collect the value of the property at the time of the loss. Think house fire, for example. Your stuff is toast – literally – but you and your loved ones, thank God, are fine.

So, it’s time to file a claim. How much is your stuff worth on the day of the fire as opposed to the day you bought it? One word: Less. More specifically, a hell of a lot less. And that’s what you’re going to collect.

If you’re more likely to need enough money to actually replace your stuff, go with Replacement Cost Value coverage. It pays you the cost of replacing everything up to the limit of your policy.

This brings us to another trick of the trade. Most Florida homeowners policies cover personal property (contents of your dwelling) up to 50 percent of the value of the dwelling itself. In other words, you get $150,000 worth of contents coverage in a house insured for $300,000. You can reduce this limit to 25 percent to save money but do the math first. Again, are you buying enough insurance?

This is the kind of detail that web sites generally don’t explain well, if at all. They’re great for showing you the competitive lay of the land but not for explaining the whys and wheres of your best option. For that you really need a good agent.