Direct physical damage to your premises is not the only problem you’ll face with a fire or other loss. Here are some important points to consider when evaluating your indirect damage:
Start with a list of all possible sources of loss to your business, including losses that could result if an interdependent facility were destroyed — for example, destruction of your warehouse.
If your business depends on suppliers or key customers, you can purchase “dependent location” business income coverage on them. You can also buy coverage if traffic to your store, for example, is dependent on a “leader property,” such as large store located near you. As with other business income coverages, policies will pay only if the income loss results from a covered cause of loss to these locations.
Don’t underestimate the time to get back on line, or the impact of losing a key supplier or customer due to a disaster on their own premises. Determine whether stockpiling materials or supplies could reduce your exposure to a contingent loss.
How long could your business operate without power, telephone, cable, water and other utilities? Virtually all property policies exclude coverage for utility service failures that occur off your premises or from transmission lines. You can buy a policy endorsement to add coverage for business income lost due to a utility service interruption at a utility service property named in the endorsement. Coverage will apply to service interruptions caused by a covered peril.
Just as your property policy will not cover increased cost of construction to meet updated building codes, business income coverage will not cover any income lost due to the increased period of restoration required to rebuild to current codes. You can fill this coverage gap by adding an “ordinance or law” endorsement, which extends your period of restoration.