Protect your business from civil unrest

Images of rioting, looting and vandalism of businesses makes most of us angry.

As you are no doubt aware, riots, vandalism and looting are a hazard that can strike any business without warning. Businesses in urban areas are especially vulnerable. These hazards can damage buildings, personal and business property, and can be personally dangerous to owners, employees and customers. However, you can financially protect your business from riots, looting, civil unrest and vandalism.

Loss Example

Protests associated with the May 25, 2020 killing of George Floyd turned violent and destructive, causing billions of dollars in damage across the United States. Riots, looting and vandalism occurred for several nights after the killing in Minneapolis, MN, the site of the killing. Korboi “KB” Balla, a Minneapolis firefighter and his wife Twyana had used their life savings to start a business called Scores Sports Bar.

On the night of May 27, Scores Sports Bar was looted, vandalized and destroyed. The opening of the business was delayed due to COVID-19 but the state had implemented the next phase of opening. The business was about to open when it was destroyed in the riots.

The Ballas did not have insurance.

Fortunately, a GoFundMe campaign on behalf of the family raised over $1 million. The time spent building the business can’t be recovered, but the material investment was recouped.

Common Terms

Business Owner Policy (BOP) is an insurance policy that packages together elements of Business Interruption, General Liability, and Commercial Property insurance. It is an alternative to General Liability. The reason is that different underwriting calculations may result in savings and increased coverage. Get a quote here.

Commercial Property is an insurance policy that protects the physical assets of a business and is suitable whether the business owner owns or leases the space. If the Ballas had this coverage, furniture and equipment could have been replaced. However, an endorsement for merchandise inventory would be needed. Get a quote here.

Endorsement (commonly known as a rider) is a change to an insurance policy that adds or modifies coverage. An example is a store owner buying a BOP and an endorsement for merchandise.

Business Interruption is insurance available to help compensate a business for lost income and ongoing expenses in the event that operations are stopped due to a covered event. Examples of covered events are vandalism, fires, or certain natural disasters.

Bear in mind that business interruption insurance may be subject to a waiting period. The waiting period acts as a deductible, during which no benefits are payable. Waiting periods are commonly 72 hours. If the Ballas had this coverage, the first 72 hours of income loss due to riots would not have been payable.

Civil authority insurance covers losses associated with governments restricting access to the business and therefore impeding operations. It is a normal feature of business interruption insurance, but verify this with your insurer. Had the Ballas purchased business interruption insurance, losses from the street closures associated with the riots would have been covered. Get a quote here.

Your responsibilities

An insurance policy is a contract, spelling out the duties of both the insurer and the insured. Policyholders are required to take action to protect insured property. You may get premium credits for doing some of the following, or the policy may require them.

  • -Sprinkler systems
  • -Fire alarm
  • -Burglar alarm
  • -Signal continuity (provides uninterrupted connection to security monitoring company in the event of telephone disconnection)
  • -A monitored business security system.

Bridge financing

Always have three years (if applicable) of the books stored in a safe, water resistant and fire resistant area. You should have profit/loss statements (also known as an income statement), along with balance sheets, and cash flow statements. You may need a bridge loan to fund the business until your insurance claims are paid. These statements will be requested by the bank. Other records include inventories or customer records.

See multiple loan options with one site here.

While there may be government disaster loans available, it is far better to have a line of credit arranged in advance. It takes time to get an insurance claim paid, but in the interim, expenses can be paid from the credit line. In many cases, the insurance claim is paid before interest payments on the credit line are due.

For additional questions on how you can financially protect your business from riots, looting, civil unrest and vandalism, contact us anytime.

Protect yourself always!

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