Small Business Owners: Are you sure you have enough coverage? | Part 2 of 2

In Part I of this two-part blog post, we learned about Joe and Maria, a husband-and-wife team who own Joe’s Pizza. Their pizza shop is a multi-generational family business that is beloved by its local community. When a catastrophic event breaks out, Joe and Maria face a reckoning familiar to many small business owners: do we have enough insurance coverage?

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If you’re a small business owner, here are a few key points to keep in mind when selecting insurance for your operation. These will hopefully help you avoid what Joe and Maria had to go through:

1.     Buy enough ‘Personal Property’ coverage. Ensure that you have enough coverage for stock, equipment, improvements and betterments. If you install the floor, redo the ceiling, paint the walls, run electric and gas lines, put in counters and install hoods – this policy will cover anything that you pay out of pocket to improve the building. Remember to review your limits regularly. Even though the insurance company does account for some inflation, it rarely reflects the actual current cost of important improvements – installing an Ansul system for fire suppression, for example. And remember: keep all paperwork and receipts for improvements! In the event of filing a claim for a loss, you must demonstrate that you spent this money, and you will be required to prove the “insurable interest” with documentation.

2.     Extend the ‘Period of Time’ for however long you will need. If your business relies on sophisticated and/or expensive equipment, think about this: how long will it take to replace that specialized machinery and fully resume operations? In the event of a catastrophic loss, it might take months to examine the loss and get the insurance company to settle your claim. Meanwhile, you’re dependent on the ‘Time Element’ coverage, which is 12 months in a standard BOP. Be sure to endorse your policy and extend it to however long you think you will need to replace such equipment and resume operations – including the possibility of temporary relocation while your site is being restored.

3.     Bolster your ‘Payroll’ coverage. Standard BOP coverage only gives you 60 days of “ordinary” payroll coverage – that is, coverage for all employees at the time of the claim. After that, the insurance company looks to your policy to see who you listed as “key employees.” These can be names or titles of those employees who are indispensable to running the business. Will you feel bad about laying off employees? Do you want to keep paying skilled pizza makers, for example, while you renovate? Make sure you have the right policy for what you want to do and have adequate payroll coverage for those people you can’t afford to lose.

4.     Buy ‘Extra Expense’ coverage. A BOP also provides you “extra expense coverage.” This coverage starts immediately for expenses that are: 1. incurred; 2. above normal; and 3. helpful in putting you back in business. Under a BOP, there is no dollar limit on these expenses. If you have a small outage, you can use that Extra Expense coverage to buy signs and advertising that promote your grand reopening. Or you can use the Extra Expense coverage to pay a realtor to find space, pay temporary rent, or to outfit the temporary location. So squeeze every drop from it!

Taking advantage of these tips all starts with having a plan in place to recover as quickly as possible from any loss that might befall your business. If you’re a tenant, it’s especially important to review your coverage as you are at the mercy of your landlord. It could take years to recover from a fire – so be sure to select coverage that carries you beyond 12 months. Businesses that have poor coverage often don’t even know it until it’s too late.  In a case like Joe’s Pizza – and, possibly, in your own – asking the right questions in advance and buying the right coverage can make all the difference between reviving the business and closing up shop for good.


If you’ve had a fire, flood or other property loss resulting in an insurance claim, and need a public insurance adjuster in Massachusetts, New Hampshire, Rhode Island, New England or anywhere in the U.S. or Caribbean, call Swerling Milton Winnick. We are the oldest and largest public adjusting firm in New England, and our team of experts will give you personalized, 24/7 attention to successfully resolve your residential or business insurance claim.