Business income insurance covers workers’ pay

  • By Paul Pukis Mosaic Insurance Alliance
  • Monday, January 23, 2012 3:13pm

When disaster strikes your business, the many thoughts running through your head creates hundreds of questions. One main question might be, “Will my insurance cover this?”

If this question continues to repeat itself before you’re able to contact your agent, it’s a bad time to be asking this question. The best time to ask this important question is before disaster strikes. But, how do you know every scenario that might destroy or bring your business to its knees? In this article, we’ll address a critical question to ask your insurance agent before something bad happens: “How do I keep my key employees?”

To stay away from business income and extra expense worksheets and CPA-related math, let’s use a story to illustrate how the business income part of an insurance policy can help you retain your key employees.

A local Everett restaurant starts showing growth after the past couple years of a slow economy. The owner is excited to see a couple months consecutively in the black. At the family dinner table, the upbeat conversation focuses on the expected growth for the business in the coming months.

At 3 a.m. the phone rings and it’s the alarm company on the other end, “Sir, the fire alarm at your restaurant just activated. The fire department is on their way.” When you arrive, it’s what you feared. The fire department is getting operational experience at the expense of your restaurant. Besides your support of creating a top-notch fire department, here is where you really need your insurance.

What do you do with your employees? What about your key employees? How about the chef who’s attracting new patrons and caught the attention of other restaurant owners? Are his services now for hire? Can you keep him away from your kitchen for months? The short answer is maybe. From the insurance point of view, there will be money available to continue to pay your chef. It’s up to you to make the unscheduled vacation from the kitchen palatable. Ah, the joys of owning a business. However, back to the insurance.

Most likely, your restaurant insurance is a business owner’s policy or a BOP. Again, most likely, the coverage provided by the BOP is actual loss sustained (ALS). This means your insurance policy will replace lost income to put you in the same financial position you would have been in if the loss had not occurred. Keep in mind this is normally for up to 12 months (longer time periods are available). This includes ordinary payroll for employees.

If your business insurance is something other than a BOP, calculating the correct amount of business income insurance may be the most important time you spend on your insurance policy. Aside from the hard assets like inventory and your building, the income you generate is the lifeblood of your business. Spend time to find the right coverage to keep the business afloat and your employees happy.

Paul Pukis is an independent insurance broker and owner of Mosaic Insurance Alliance in Lynnwood. He can be reached at 425-320-4280 or