Do You Need Insurance While Your Business Is Closed?

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In a study done by the Federal Emergency Management Agency (FEMA), it was found that 40% of businesses will fail to reopen after a disaster, and 25% will fail within one year. And whether you own a restaurant or a dentist’s office, sometimes there are occurrences that will cause you to temporarily have to close your business.

These closures might be due to a personal holiday, giving your employees a temporary break, legal reasons, a crisis or even disaster. Whatever the reason for your temporary shut down, during any substantial amount of downtime, you will still need to hold insurance for temporary closed businesses to cover you with the right amount of protection should disaster strike.

Why Hold Insurance During Downtime?

During times of closing your business, you may deal with challenges. These challenges can include a lack of cash flow to pay employee’s wages, utilities or even your rent or mortgage.

Weather is one of the main reasons businesses may need to temporarily shut their doors. Depending where your business is located, it may be subject to viscous storms that can damage your building, and in an event such as this, insurance can help cover the cost of repairs.

Further, if your business is closed or vacant for a substantial amount of time, then there is an increased risk of theft or vandalism. Businesses contain a lot of valuable information and products. Stolen money or property can leave your company in shambles, and business insurance policies can help cover these costs.

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What Type of Insurance Do You Need?

There are a few different types of insurance that would be helpful to hold during a period of temporary business closure. That being said, one of the most important aspects of coverage to have secured during a temporary business closure is Crime insurance protection of some kind.

Business Owner Policy (BOP)

When purchasing a Business Owner’s Policy (BOP), you insure protection for all major assets on the property as well as for all liability risks. This type of insurance includes all of the basic coverages that a business owner needs, including Crime insurance and anything you require to properly run a business.

Often included in a BOP is Business Interruption insurance. This is very helpful when it comes to temporary business closure. All other expenses related to closure will be reimbursed including revenue. For example, if your restaurant needs to close for a few months to renovate after a break-in that includes vandalism, your BOP will cover you.

One great aspect of a business owner policy is that it bundles together several coverages at a lower premium than the total cost of the individual coverages sold separately. This can save you money in the long run, should you choose to take this bundled insurance option.

Commercial Property Insurance

Commercial Property insurance covers the building of your business and its contents. It will cover furnishings, fixtures, computers, other equipment and inventory in the event of:

  • Theft that might include laptops, tablets or other equipment. Commercial Property insurance will pay to replace stolen property or anything damaged during an act of theft.
  • Weather-related damage such as a leak in the roof or a natural disaster will be covered.
  • Accidental damage can happen and result in damage to the property. Even if an employee is to blame, this insurance will cover you.
  • Vandalism and crime are a reality when leaving your business vacated. Commercial Property insurance can help to cover the cost of repairing and replacing windows, walls, doors or anything else that is vandalized.

It is important to be aware that Commercial Property insurance does NOT cover:

  • Forced closure due to property damage. This is very important to note because if you are temporarily closing for this reason, you will not be covered under your Commercial Property insurance policy.
  • Employee injuries that occur while doing anything during a closure, even if the activities are for the business.
  • Cyberattacks and Data Breaches. If this occurs during a time of closure or even any time your business is operating then you will not be covered under a Commercial Property insurance policy.
  • Vehicles used by your business even if used to deliver during times of closure. Instead, you will need to have a Commercial Auto insurance policy.

Commercial Crime Insurance

If not already included in your BOP, then you should make sure you have Commercial Crime insurance. This insurance will cover not only your property, but also your merchandise, cash, and securities against theft and even embezzlement or forgery by employees.

Included in Commercial Crime insurance is robbery and theft insurance. This will protect your business from employees and any non-employees that commit theft or robbery. Commercial Crime Insurance will also cover your business if you experience a burglary while your business is closed.

Unoccupied Premises Warranty

You should always review your policy to ensure that this clause is included and adhered to if your property is closed. Some of these clauses might include a warranty that requires inspections of the property before the closing period. An Unoccupied Premises Warranty can be for long-term vacancies or for specific periods of time that the property is vacant.

Homeowners Insurance

In the case that you need to store items away from your business and, more specifically, off of your business’s property, you may decide to store items at home. You want your property protected no matter where it is stored. If you decide to store products at home, you will need homeowners insurance to protect your goods.

What to Look For in an Insurance Policy

When looking for an insurance policy, you want to make sure you are protected in the case of most major events. This means that you should be covered for an interruption in your business, or a temporary business closure, which is essentially insurance for inactive businesses.

You can look to reduce your premium by adjusting your coverage to the things you value most, whether that is your property, operating costs or employee coverage. Every business is different and so is the insurance that they need. If you are unsure as to what type of coverage is necessary for your business, feel free to speak with an experienced advisor from CoverWallet today for more information.

What You Might Lose Without Insurance

In 2018, the largest Commercial insurance in the United States paid out $17,580,086 in claims. That means that without insurance, scores of businesses would have been liable for these costs. Not only might you be liable for costs, but you also run the risk of losing your business. Make the smart decision of purchasing business insurance, even while temporarily closed, to ensure that your business is protected.

Steps to Take When Temporarily Closing Your Business

When temporarily closing your business, you may run into a number of challenges. You may run into short-term cash flow challenges, issues with employees, or even problems with investors or stakeholders. Certain steps need to be taken to accommodate these issues before your business temporarily closes.

1. Combating Cash Flow Challenges

  • Determine your cash needs for the next 1-6 months, depending on how long you plan to be closed. You need to make sure you can stay up-to-date on all bills and expenses that will continue during your temporary closure.
  • Speak to suppliers that regularly deliver or that you have a credit with. You should make sure to cancel any recurring orders and, if possible, pay off any invoices that need to be paid.
  • Freeze all purchases to avoid waste and extra costs.

2. Dealing with Your Bank, Investors and Stakeholders

  • During a period of closure, your bank should be able to offer you support. Ask to speak with your bank manager or financial provider as soon as you know you will need to close your business.
  • Speak with your investors and/or stakeholders to create a plan. This plan should involve managing a lack of cash flow and what you will need to do to maintain your business during the closure.
  • If you are dealing with an emergency or crisis, you may qualify for emergency working capital loans, payment flexibility on existing loans or even access to support funds.
  • Determine what support you will need during your closure.

3. Clients and Customers

  • Your customers or clients are the backbone of your business; this means it is incredibly important to maintain lines of communication with all of your customers, especially your most loyal ones.
  • Continue to send out emails or newsletters to keep your business within the minds and memories of your customers. Ensure they deliver quality value and are worthwhile to the reader.
  • If you have any appointments, reservations, credits or business commitments booked, you should make sure to rebook and issue any necessary credits for a later date.
  • Attempt to move any business online or in another way to continue to generate revenue. This way, you can continue to somewhat operate and cover costs, rather than lose all revenue.

4. Ensuring Security for Your Employees

  • If you are experiencing a closure then it will likely affect your employees in a big way. You should take the proper steps to ensure their security if possible.
  • If you are not able to secure their jobs, you should give them as much notice as possible so that they can begin planning accordingly.
  • Although you will want to keep paying your staff, you need to establish what you can afford.
  • Maintain communication and a positive relationship with your staff so that they are ready and motivated once your business opens up again.
  • Help your employees file for unemployment, or give them resources to get through the closure time. You should be up-to-date on all employee rights during temporary business closures.

5. Utilities

  • Make sure that all of your unnecessary utilities have been turned off when you close your business. You will also need to temporarily check in to confirm that your water installation is monitored so as to avoid any leaks that may cause damage.
  • Keep your power supply up-to-date and well-maintained to keep all essential services operational.
  • If possible, continue to monitor pest control so you do not walk into a pest infestation when you decide to reopen.

6. Security

  • During a temporary closure, security should definitely be put into place. Ensure that your property is securely locked and that all of your security systems are working.
  • Plan to visit your property frequently during the temporary closure. You may be required to hold inspections to your property in order to stay compliant with your insurance policy.
  • Be sure to record any inspections to guard against any attempted non-payment of claims from your insurance provider.

7. Communication with Staff, Suppliers, and Customers

  • Attain all contact numbers for staff and share any necessary numbers with everyone in the team for solid, encouraging and effective communication.
  • Do not forget to contact your suppliers to notify them of your temporary closure.
  • Update your social media and website to notify your customers that you are closed and to notify them again when you reopen.

Creating a closure checklist beforehand is the best way to ensure that everything is in order before your business closes its doors.

8. Speak with Your Insurance Company

The most important step in combating challenges during a temporary closure is to consult with your insurance company. Do not wait to obtain coverage as there may be time limits. As long as you have taken the necessary steps beforehand to secure a business insurance policy that covers your business while closed, then you should have no trouble when you look to reopen.

Find A Policy That is Right For Your Business

Temporary closures can happen for a variety of reasons, and as unfortunate as it is, many of these reasons we cannot control. It is important to have an insurance policy in place ahead of time to be prepared for these types of situations.

Just because your doors are closed does not necessarily translate to business being done. Nowadays, a wide variety of businesses can operate online (with the proper insurance in place) while the physical store location is shut down for the time it needs.

At CoverWallet, we have your best insurance interests at heart. Protect your business no matter what with a business insurance policy. If you have any doubts, contact us today to speak with a professional and tailor an insurance policy that is custom-fit to your business needs.

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