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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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I stumbled upon this blurb the other day about a survey, which shows that a large percentage of small business owners are whistling by the graveyard.

It seems small business owners would rather focus on growing their companies than on protecting them. Naturally. Most small business owners are entrepreneurial by nature. Risk is just part of their landscape. It’s not in their nature to stress over it.

At some point, though, you cross a line between optimism and denial. Case in point: 41 percent of small business owners surveyed are “extremely confident” that they’re protected against insurable risks that could drive them under or cause huge financial losses.  Yet 39 percent said they “can’t make the time” necessary to identify those risks and manage them.

See the disconnect? Anyone who has eaten a big loss has plenty of time to insure against another. It’s sort of like people who back up their hard drives. If you’ve ever lost one, your back-up plan probably borders on compulsion.

The computer analogy is especially appropriate here because one of the big risks small businesses face is data loss owing to hardware failure and human error, not to mention more sinister varieties of data breach.

I won’t bore you with stats. You already know this is a huge problem that’s growing worse. Businesses that accept credit cards or store personal data, like Social Security numbers, are vulnerable to losses. Expensive losses, not to mention lawsuits and reputation implosions.

What’s more interesting is that many of these losses originate from simple managerial oversight or common criminality as opposed to high-tech intrusions.

Check this list of data breach incidents from the Privacy Rights Clearinghouse. Choose a month then scroll down and scan the descriptions. You’ve got employees losing company laptops, dishonest workers selling credit card numbers and outdated software displaying personal data online.

Notice that the list of organizations covers the spectrum from giant corporations to mom-and-pop restaurants. Auditors went into the Oakridge National Laboratory in Columbus, Ohio and found old hard drives containing sensitive information tossed into hallways, unused offices and loading docks.

So, let’s say you own a restaurant and someone on the wait staff decides to keep credit card numbers. Or maybe you run one of those varicose-vein removal centers and a laptop full of patient records turns up missing. Or suppose your server crashes and takes about three years worth of critical data with it.

Are you ready for that? Are you covered, if patrons or patients sue you? Are you covered for the many thousands of dollars it’s going to take to try to recover data from that crippled drive?

If not, you might want to make time to learn about data breach insurance. Better now than after a meltdown. A good policy could literally mean the difference between a setback and a total loss.