Business Interruption Coverage: Why You Need it and What Should be in Your Policy

By Christopher Bolger Senior Risk Manager, Venture Insurance Programs | March 29, 2015

After a catastrophe befalls your hotel, you are forced to cope with not only the significant costs of clean-up and repair, but the loss of business income when your usual operations are interrupted. In these instances, hotels often lose multiple income streams, from rooms to events to food and beverage.

Hotels are often careful to scrutinize and mitigate the sorts of risks that may shut down business for an extended period of time. After all, no business would think of going without property insurance. However, far too many are not properly insured for the immediate aftermath of a property loss such as a fire or burst pipe. All business tend to underestimate the risk of business interruption and its significant costs.

Business interruption insurance coverage, also known as business income coverage, exists to provide business owners in all industries support while they recover from the unthinkable. Unfortunately, quite a few hotels are underinsured for this coverage. So, why does a hotel need this coverage, and what does it look like in practice? Letís take a closer look at the risks.

Where Business Interruption Coverage Applies

Offered as part of a hotelís property insurance policy or as part of a business ownerís policy package, business interruption coverage goes into effect after a covered loss that affects the operation of the business. It covers the loss of net income due to business interruption or suspension and any ongoing operating expenses during that period of time.

It is no exaggeration to say Superstorm Sandy obliterated parts of the Jersey Shore and Long Island. In fact, the devastation was so complete, that authorities kept evacuees out of their neighborhoods and proprietors away from their businesses for weeks after the storm. In some cases, people could not reenter the neighborhoods where they lived or worked for weeks after the storm.

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Human Resources: Value Creation

Businesses must evolve to stay competitive and this is also true of employment positions within those organizations. In the hotel industry, for example, the role that HR professionals perform continues to broaden and expand. Today, they are generally responsible for five key areas - government compliance; payroll and benefits; employee acquisition and retention; training and development; and organizational structure and culture. In this enlarged capacity, HR professionals are no longer seen as part of an administrative cost center, but rather as a member of the leadership team that creates strategic value within their organization. HR professionals help to define company policies and plans; enact and enforce systems of accountability; and utilize definable metrics to measure and justify outcomes. Of course, there are always new issues for HR professionals to address. Though seemingly safe for the moment, will the Affordable Care Act ultimately be repealed and replaced and, if so, what will the ramifications be? There are issues pertaining to Millennials in the workforce and women in leadership roles, as well as determining the appropriate use of social media within the organization. There are new onboarding processes and e-learning training platforms to evaluate, in addition to keeping abreast of political issues like the minimum wage hike movement, or the re-evaluation of overtime rules. Finally, there are genuine immigration and deportation issues that affect HR professionals, especially if they are located in Dreamer Cities, or employ a workforce that could be adversely impacted by federal government policies. The March Hotel Business Review will take a look at some of the issues, strategies and techniques that HR professionals are employing to create and sustain value in their organization.