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Every Business Owner Needs Insurance To Prepare For Operational Interruptions
Operational disruptions can devastate any business from a small startup to an established large corporation. One way to offset the loss of revenue or access to the business space is with business interruption or BI coverage. Many business owners underestimate the true costs of any form of interruption, and others simply do not think that it will happen to them.
Floods, fires, pests and many other types of incidents can lead to a temporary interruption of operations.
About 40 percent of businesses in the United States have experienced a form of business interruption within the past five years. Also, research shows that more than 65 percent of small businesses do not have BI coverage.
What Is Business Interruption Insurance?
If a company has to shut down its physical business or halt operations for a period of time, this coverage applies. It is used when a business shuts down because of disaster-related damages, which are usually covered by property insurance. Cyber risks, supply chain interruptions and natural disasters are a few examples. While the damage to the business itself may be covered by property insurance, lost revenue and other expenses related to temporarily closing are only covered by a BI policy.
BI coverage usually includes expenses that exceed normal operation costs during the interruption period. For example, if a business owner has to pay more to temporarily rent a different office building, the increased rent would be covered. Also, if a business such as a factory that cannot move must cease operations temporarily, the lost revenue from production and the wages of employees would be covered. Other expenses such as employee meals, overtime and most equipment purchases are covered.
When Does BI Coverage Start?
The following three circumstances activate a BI policy's payout terms:
The property sustained physical damage because of a loss that is covered under the property insurance policy, and the damage prevents customers or employees from accessing the building.
There is enough physical damage to the building that it must suspend operations.
The surrounding area was shut down by the government because of peril-related property damage, and the order requires customers and employees to avoid entering the premises.
With most policies, there is a waiting period of a few days or more. The policy's payout limit is usually about 12 months and compensation is distributed as needed during that time. Some policies specifically address government shutdowns and blocked access to the premises of a business. When purchasing a BI policy, be sure to keep financial records updated at all times. These are requested when a business owner files a claim against a BI policy.
To learn more about this type of coverage, ask an agent about business interruption insurance, call with us at HALO Insurance and Benefits Group 314-351-HALO(4256).
Water Damage Coverage Explained
In some instances, water damage is covered by insurance. However, there are limitations. The best way to ensure that damages will be covered if they happen is to frequently inspect the home to find any problems that may be causing water damage.
When Is Water Damage Covered?
If a sudden event causes water damage, it is usually covered. This does not apply to flooding from rain or a rising body of water nearby. Flood damage is only covered by a separate policy, and flood insurance is typically purchased from the government's National Flood Insurance Program. Sudden flooding from a burst pipe, a broken hot water heater or a broken washing machine hose may lead to some damages, and these are covered. The same applies if a dishwasher breaks or a toilet overflows. However, if there are other damages that occurred over the span of several months because the toilet was leaking and was not repaired, those damages are not eligible for coverage. The source of the water damage is not covered. For example, the cost of replacing a water-damaged floor after a dishwasher breaks may be covered while the cost of replacing the dishwasher is not covered.
When Is Water Damage Not Covered?
As a rule, any water damage that results from neglected plumbing issues is not covered. People often underestimate the seriousness of a leaky faucet, shower head or toilet. Pipes in basements that leak often lead to mold or mildew collecting. If mold is collecting, it is usually a sign of slow-developing water damage. Ruined floor boards, sink cabinets, walls, beams and carpeting are not covered if the damage has been building. This is why every homeowner must inspect the home regularly for any signs of moisture. If a dishwasher or hot water heater breaks and floods a room but the damages are not reported immediately, they may not be covered. Prompt reporting is the key to compensation. Flooding from an outside sewer drain backup is not covered.
How To Avoid Water Damage
Leaky faucets and toilets should be fixed immediately. Toilets that flush twice, run too long or have other issues should be repaired promptly. Toilet failure is the leading cause of water damage on home insurance claims in the United States. Another common cause of water damage that is not covered is when water seeps behind the walls of a home. This often happens when there is a crack or a hole in the roof. Keeping the roof in good repair is a must, and be sure to clean the gutters frequently to avoid destructive clogs. Down spouts should be in good repair and should be routed away from homes or garages. Dishwasher and washing machine hoses should be inspected frequently and replaced or tightened as needed. Check visible pipes frequently to look for signs of leaks, and look under bathroom and kitchen sinks weekly to see if any pipes are dripping.
When a sudden emergency happens that causes gushing water, turn off the water source immediately. Try to clean up as much water as possible, and call an agent promptly to get a claim started. To learn more about preparedness and preventing water damage, speak to an agent at 314-351-HALO(4256).
Will The Government Help Me if I am Disabled?
A young person's chance of becoming disabled prior to retirement is greater than his or her chances of dying - yet government supports for those who are disabled are quite limited.
First, let's go over some sobering facts:
About 25 percent of today's 20-year-olds will experience disability before they retire, according to the Council for Disability Awareness.
About 12 percent of the population - 37 million Americans, are disabled. Half of them are between 18 and 64, according to the U.S. Census Bureau's 2011 Community Survey.
There were 2.8 million new SSDI (Social Security Disability Insurance) last year, according to the Social Security Administration.
The Social Security Disability Insurance Program is there, but extremely difficult to qualify for. Even then just applying for SSDI and getting an approval takes up to a year, during which time you may have no income to live on.
To qualify for SSDI, you must also be "insured," meaning you must have worked and paid Social Security taxes at least one quarter of each year since you turned 21, and a minimum of six quarters, total. You are fully insured after earning 40 quarters even if you cease working, however.
The maximum disability benefit from SSDI in 2014 is $2,642, but the average payment received is $1,148.
The Social Security Disability Income program is coming under actuarial difficulties, however. It is uncertain how long the U.S. can continue paying the current level of benefits.
Workers compensation insurance can work for you if you were injured on the job and you were covered by your employer's worker's compensation policy. In most cases, employers are required by law to maintain workers compensation insurance policies. However, according to the Council for Disability Awareness, only 1 in 10 disabling injuries or illnesses were work-related. The vast majority of disabilities have nothing to do with work, and workers compensation will not help you in these instances.
If you are a qualified veteran and you incurred a service-related disability, you may be able to get disability compensation. Like SSDI applications, applying for VA benefits can be a lengthy process, and the backlogs are notorious. These benefits are tax-free and graded on a scale of 10 to 100, with 100 being totally disabled and commanding the highest level of compensation.
Statutory Disability Insurance
There are currently five states that mandate a baseline disability plan covered by mandatory premium payments from employees: California, Hawaii, New Jersey, New York and Rhode Island. Puerto Rico has a similar arrangement.
Each of these options is very limited. If you are earning anything over a working class income, these programs will not be able to replace enough income for you to maintain the lifestyle you and your family had worked hard to attain to this point.
Employers may offer a workplace group plan, but these tend to be limited as well. Employers often choose relatively narrow disability definitions that are tough to qualify for, for example. Or waiting periods (called exclusionary periods) that are not realistic, only last for, say, six months or a year (the average disability claim is 34 months long, according to the Council for Disability Awareness)
These plans are also generally not portable. If you leave your job, you must leave your coverage behind. If you have had some intervening health issues, it could be difficult or impossible to secure replacement coverage.
Own Your Own Insurance Policy
In most cases, we recommend owning at least some individually-owned disability insurance. This coverage is portable - meaning it follows you, not your employer. And as long as you keep the policy in force, you don't have to worry about someone else cancelling it.
Disability insurance is usually designed to replace a portion of lost income - usually up to 65 percent, depending on the option you select - if you can no longer work or experience a reduction in income because of injury or illness.
When you own your own policy, you can also select the definition of disability. For example, you can select a policy that compensates you under a broader array of circumstances. Most employer policies, and nearly all government programs, only provide benefits if you cannot work at any occupation. By buying your own plan, you can purchase a plan that pays benefits if you cannot work at your own occupation. Which makes it much more likely that you will actually qualify to receive a benefit.
Furthermore, if you own your own plan, rather than rely on an employer, benefits are generally income tax-free.
You must qualify medically for this coverage, however. So it's important to get covered early. While your health doesn't have to be perfect to qualify, even seemingly minor issues can sneak up on you and make it difficult to get coverage later in life.
Buying while young also allows you to lock in a more affordable premium for as long as you choose to keep the policy.
How To Buy It
To purchase your own policy, just contact a licensed agent 314-351-HALO(4256) who sells disability insurance and get started. It's a simple process, similar to applying for life insurance. Expect to have to take a medical exam. Premiums generally run from 2 to 4 percent of income for a fairly robust plan. Women generally pay more than men, but are also much more likely to need to file a claim then men are.
Where You Live Can Determine How Much You Pay For Homeowners Insurance
Homeowners insurance protects against several causes of loss, but probably the most significant cause is fire. Once started, a fire can quickly destroy a home. A home's chances for surviving depend in large part on the quality of the fire protection services and resources available. The insurance industry has a measurement for fire protection quality - the protection classification.
The Protection Classification system was developed by the Insurance Services Office (ISO), a provider of data, analytics, and decision-support services for the property/casualty insurance industry. The system ranks a community's fire protection system on a scale of 1 (best protection) to 10 (essentially unprotected). It calculates a community's grade by evaluating three aspects:
The quality of the fire department accounts for half of the grade. Evaluators consider:
The distribution of fire companies throughout the area
The amount of water needed to fight a fire
How frequently the department tests its pumps and inventories its equipment
Types and extent of training activities and the number of personnel who participate
Firefighters' emergency responses
Equipment maintenance and testing
Another 40 percent of the grade is based on the community's water supply. The system looks at how much water is available for fire suppression after allowing for the maximum amount the community uses each day for other uses. It evaluates all of the components in the water supply system (piping, hydrants, etc.), inspections of hydrants, how often the community tests water flow from hydrants, and the number of hydrants less than 1,000 feet from certain locations.
A small amount of weight is given to the state of the community's emergency communications, meaning how well the fire department receives and dispatches fire alarms. Evaluators look at the emergency reporting system; the communications center; the number of people working there; computer-assisted dispatch facilities; and how firefighters are notified of an emergency's location.
Using a mathematical formula, ISO calculates a community's protection classification. A community with a grade of 1 has a professional fire department, plentiful water supplies and excellent communications. A community with a grade of 10 may be rural with many locations more than 1,000 feet from a hydrant, a volunteer fire department, and communication by phone and an alarm audible from throughout the town.
A community's protection class significantly impacts the cost of homeowners insurance there. Insurance company statistics show that fire losses cause less damage and cost less to repair in communities with low protection class ratings. Conversely, a home in a community with a grade of 9 or 10 is more likely to be destroyed before the fire department is able to get a blaze under control. Since insurance companies base their premium rates on the risk of loss, they naturally charge higher rates for homes in communities with weaker fire protection.
Protection class is not the only factor that influences insurance rates, but it is an important one. Where you live has a lot to do with how much you will pay for homeowners insurance.