Covering Your Butt (and your income)

I just spoke with my favorite small business owner -- Kelli of Kelli's Cleaning Angels. We moved last week and she's hoping to stop by later to give us an estimate on cleaning services for the new place.

As many of you have no doubt heard by now, Brisbane has been devastated by flood this week. The news reports are not exaggerating. This city has been slammed. It will take the better part of the next week to get the river down to normal levels and then there's thousands of acres of devastation (not to mention really smelly mud) to deal with.

Kelli said a good 35 - 45 of her clients are along the river and have had their places ruined. Which means they won't be needing her services for months, as a minimum!

Oh. Shit.

She's still got her high-rise apartment jobs. She's also going to talk to insurance companies today about using her company for some of the flood-related clean-up (gotta be flexible and creative -- and quick! -- when you're a small business).

So while the flood didn't harm her home, person, or equipment (or her employees it sounds like), she's still had her business severely damaged by the flooding.

We think about insuring our persons and our equipment. We think about liability insurance. But what happens if factors waaaaaaaaaaaaaay beyond our control make it difficult, if not impossible, for us to work?

When I was teaching business practices, I ran across a reference to "business interrruption insurance". I knew of no one who had it (or had heard of it) so I didn't really go anywhere with it. I've been thinking about it, though, a lot this week so I did some research.

As defined by Wikipedia (I know, I know, but I do find them helpful!):

Business Interruption Insurance (also known as Business Income Insurance) covers the loss of income that a business suffers after a disaster while its facility is being rebuilt. A property insurance policy only covers the physical damage to the business, while the additional coverage allotted by the business interruption policy covers the profits that would have been earned. This extra policy provision is applicable to all types of businesses, as it is designed to put a business in the same financial position it would have been in if no loss had occurred.

This type of coverage is not sold as a stand-alone policy, but can be added on to the business' property insurance policy or comprehensive package policy. Since business interruption is included as part of the business' primary policy, it only pays out if the cause of the loss is covered by the overarching policy.

The following are typically covered under a business interruption insurance policy:

• Profits- Profits that would have been earned (based on prior months' financial statements);
  
• Fixed Costs- Operating expenses and other costs still being incurred by the property (based on historical costs);
  
• Temporary Location- Some policies cover the extra expenses for moving to, and operating from, a temporary location;
  
• Extra Expenses- Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operation while the property is being repaired.

This coverage extends until the end of the business interruption period, which is determined by the insurance company. Most insurance policies define this period as starting on the date of the covered peril and the damaged property is physically repaired and returned to operations under the same condition that existed prior to the disaster.

It's clearly geared to covering the lost income and additional costs involved if the location where you practice massage is not usable. I wonder if it also covers you if you can't get to your practice space, even if the space is intact.

• A flood doesn't damage your place but makes it impossible to get to it.
  
• Something like a 9-11 attack occurs and the city is shut down.
  
• You are a mobile business (like Kelli or outcall services) and a natural disaster wrecks your client base

There's so much to think about when insuring your business. There's so many things you can lose. And when you don't make a huge amount of gross or net income (like so many of us), it's so easy for that income to be screwed up.

I'm not trying to depress you. Just enlighten you about the possibilities.