Is it time to talk to your Insurance Guy? For those advisors that worry something else might be coming after a volatile market, worldwide pandemic, and historic civil unrest then the answer is probably yes. For those who don’t worry about what’s next, or maybe haven’t considered what the impact of three inch predatory wasps invading honeybee colonies in the Pacific Northwest could be on food supply chains and industrial agriculture in 2021, the answer is definitely yes.
Every business should have a solid, well thought through business insurance plan. Financial advisors may be masters at managing risk for their clients, but they should also know to risk manage their own business by having appropriate business insurance. While the mix of what makes up appropriate for one advisor necessarily differs from another, based on their respective state or locality, the physical location of their work and the number and kinds of clients they have, there is one clear and common thing among all advisors when it comes to insurance: no one could have seen 2020 coming. Is it time to talk to your Insurance Guy about your business insurance? For those advisors that worry something else might be coming after a volatile market, worldwide pandemic, and historic civil unrest then the answer is probably yes. For those who don’t worry about what’s next, or maybe haven’t considered what the three inch predatory wasps invading honeybee colonies in the Pacific Northwest might do to food supply chains and industrial agriculture in 2021, the answer is definitely yes.
A quick review of what we mean by business insurance might be helpful here. First, you may have a premises liability insurance plan. That insurance covers slips or trips and falls by clients (and sometimes employees) within your physical workspace. You may also have workers’ compensation insurance for similar work-related incidents, depending on the size of your workforce. You may also, separately or as a part of your premises liability plan, have property insurance to cover damages to your office.
You may also have, or want to consider business interruption insurance. Allstate defines Business interruption insurance as replace lost income and pay for extra expenses when a business is affected by a covered peril. Business interruption coverage (sometimes called business income coverage) is typically part of a business owners insurance policy. The purpose of business interruption coverage is usually to make up for lost profit during the time it takes to restore a physical property. That may mean it can “only triggered, in most policies, by having physical damage to the insured property.”[1]
The Insurance Information Institute recommends that small to mid-size businesses bundle their insurance plans to save money. As they note: “A business owner’s policy (BOP) often combines property, liability and business income (interruption) coverages for small–to-midsize businesses. Coverage purchased as a package is generally less expensive than if purchased through separate insurance policies and can help ensure proper underlying limits are in place. Normally, companies with 100 employees or fewer and revenues of up to about $5 million or less are candidates for a BOP.”
They also recommend that small to mid-size businesses make sure that they have sufficient length of coverage for insurance. “Business owners should make sure the policy limits are sufficient to cover their company for more than a few days. After a major disaster, it can take more time than many people realize to get “back in business.” …. Typically, there’s a 48 to 72-hour waiting period before the period of restoration kicks in. The standard property policy limits the business income restoration period to 30 days….”
Unfortunately, business interruption insurance does not cover pandemics, viruses or communicable diseases. This rider is usually inserted as part of boilerplate (or standard contract language) for restaurants or similar companies that serve the public and may have public health requirements to meet. But it may carry over into other business interruption insurance for service industries, like financial advisors.
Aprio, a CPA advisory firm, suggests that small businesses concerned about losses based on COVID-19 consider whether their policies have a civil authority coverage clause, which (depending on its contents) could help companies that were ordered to shutter their physical locations by government order. It is usually only triggered by property damage that a civil authority deems to have rendered a business unsafe, but may be worth reviewing with an attorney who specializes in insurance coverage disputes.
While business interruption insurance may not have been triggered by COVID-19, for advisors with physical locations in buildings damaged by civil unrest it may be available.
[1] https://www.aprio.com/whatsnext/business-interruption-insurance-and-covid-19-what-you-need-to-know/
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
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