Interruption Insurance

Have you ever noticed that while the words ''insurance'' and ''interesting'' are very close in the dictionary, you almost never hear them used in the same sentence?

''I sell insurance,'' Phil Lyons told the Palmetto Bay Business Association. ``When I talk, people's eyes glaze within five minutes.''

Yet, Lyons, a vice president with InSource Inc., in Dadeland, kept the audience's attention with his presentation on the very timely subject of business interruption insurance.

With hurricanes attacking Florida from every angle this year, the audience not only listened attentively, but also had questions. The premise of business interruption insurance is simple, said Lyons.

``Think of it as disability insurance for your business.

''When something happens to shut down your business, your damage insurance would cover repairs in a fire, flood or windstorm,'' he told the group. ``But you may be closed for months. During that time you have continuing expenses. Your own salary and those of your employees. Mortgage and tax payments and outstanding business loans. Bills from suppliers. None of those are covered by your property damage insurance.''

Fewer than half of all businesses have interruption insurance, he said, and many of those find they don't have enough when they suffer a loss.

Also, while the concept is simple, in fact the coverage can get very complex and you may need to buy special endorsements to get the protection you want.

For example, Lyons said, the trigger for business interruption insurance is damage to your building.

The business has a fire, is closed for repairs, and the interruption insurance compensates for lost income.

But if there is no damage, there is no coverage. That happened frequently this year as hurricanes knocked out power to entire communities for weeks.

The businesses had to close, even though they escaped damage, but the interruption insurance did not kick in unless a special extra-cost clause was inserted.

Or, perhaps, a key supplier in another state has a fire and can't ship you the parts you need to make your product.

Again, you would not be covered unless you have an extra-cost endorsement to cover this possibility. What if your computers crash or are infected by a virus and nobody can get any work done?

This requires a separate coverage, also. You can see there are many questions to be asked and answered so you end up with the level of protection you want.

A surprising number of people at the Palmetto Bay Business Association raised their hands when Lyons asked if they have business interruption insurance -- a hard-learned lesson from Hurricane Andrew, some said.

So why are so many businesses around the country without this coverage? Lyons told the group that it's hard to sell, and some agents don't push very hard.

''First,'' he said, ``it's difficult to foresee losses and predict loss amounts. Projecting business interruption losses involves some educated guesswork. It is particularly difficult for a new business to do this accurately. Likewise, it is very easy for a growing business to underestimate the amount of coverage needed.''

He said that the insurance requires completion of a ''business interruption work sheet'' that can get time-consuming and perhaps require the services of a CPA, and the business may have to disclose confidential financial information.

Also, Lyons said, ``unlike insurance for property damage, this insurance usually is not required by lenders, and it's natural for a business to focus only on what is required. Business owners have limited financial resources, and it's hard to spend money on insurance rather than put it back into their business.''

Is business interruption insurance for you?

Lyons asked some questions to get the audience thinking, and handed out a seven-page checklist (you can get a copy by calling him at 305-670-5337 or e-mailing PLyons@Insource-inccom.)

Lyons suggested that business owners ask their insurance agents about business interruption insurance and if the agent seems uninterested or uneducated, they should seek assistance elsewhere.

''This kind of insurance is important for businesses everywhere,'' Lyons said, ``but in Florida it's almost a necessity.''