Cincinnati Financial : Make sure your insurance keeps up with your business

A business owner doesn't have to understand every detail of a machine or a process to benefit from it. How many drivers understand what is going on under the hood? How many machine operators are able to repair the machine? Insurance coverage can be the same way.

Just as you rely on a qualified technician to properly evaluate, maintain or repair a complex piece of equipment, you rely on your independent agent to evaluate your insurance needs and guide you in obtaining the necessary coverages, including business interruption and extra expense coverage.

For example, consider essential equipment you use every day to operate your business. The equipment does not have to be involved in actual manufacturing or assembly of a product to be vital to your operation; it could be equipment used to provide services, facilitate communication or manipulate critical data.

To be successful, you must invest considerable time, effort and expense to evaluate costs of operating and maintaining the equipment. Unless you make that investment before you buy, you could be in for unpleasant surprises. And you're not home free once the equipment is installed and contributing to your business's success. You need to know how the machinery - or its failure - could affect your bottom line.

Similarly, you don't want to guess about the production value of equipment when you establish insurance limits and deductibles needed to recover from a covered equipment failure.

Business interruption and extra expense insurance coverage is calculated based on the language in your insurance contract and in accordance with accounting principles. It also takes into consideration many aspects of your operating profits and expenses that may not be obvious from a cursory review of production numbers.

Business interruption coverage is just as important to your business as the machine itself - maybe more important. It's not uncommon for the business interruption portion of a covered machinery and equipment loss to dwarf the loss associated with physical repair of the equipment.

Your local independent agent, who is familiar with your business and the provisions of your insurance contracts, can be a source for essential information and guidance. Consider inviting him or her into any conversation you may have about protecting your business from loss. You will be glad you did.