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"I discovered Shepard Insurance about 5 years ago, while shopping around for competitive auto insurance policies. Not only were their prices enticing enough to encourage me to sign on with them, but their customer service has been what has kept me a loyal customer for five years. Since that auto policy, I've since purchased a home, and started a new business, both of which are also covered by Shepard. Luz and her team have been great, keeping in step with my every need."



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Although most small-business owners know they need property and casualty insurance for their premises, many don't realize they need specialized insurance coverage to limit their losses from a disaster.  Perhaps the biggest omission owners make when buying a commercial policy is business-interruption insurance.

"They fail to think about what would happen if their business couldn't open again," says Loretta Worters, vice president for communications of the Insurance Information Institute, a New York—based trade group.

Worters notes that business interruption insurance should be part of a company's business plan, the blueprint needed for any kind of loan or financing. But even the many owners who fund their companies themselves should buy this type of insurance—or they could see their hard work and dreams become a casualty of a fire, flood, earthquake or storm.

Business-interruption insurance covers profits that are lost and expenses that continue to be incurred when a company is forced to shut down by a disaster, or even by an event such as an extended power outage. Policies typically have a 48-hour waiting period before coverage starts, but, depending on how much coverage a business buys, interruptions up to 360 days can be covered.

Among the expenses that business-interruption insurance covers are salaries, rent, and electricity—costs that you still need to pay even though you can't operate.

How much business interruption insurance a company should buy is, of course, an individual decision, but it should be considered along with a disaster-recovery plan.

If you are certain you could quickly relocate your operations to another site and keep working, you might not want to buy the maximum amount available. But disasters like the Sept. 11, 2001, terror attacks and Hurricane Katrina have shown that the unthinkable can happen—companies can be uprooted and put out of commission for months. Without business interruption insurance, many companies have failed.

"The biggest hazard of all is being shut down," says Carol Chastang, a spokeswoman for the Small Business Administration. "Business interruption insurance is absolutely vital."

A type of coverage related to business interruption insurance and also often overlooked, is extra expense insurance. This reimburses a business for costs related to having to shut operations down. Worters says this kind of insurance covers expenses such as moving costs and new equipment and supplies.

Companies can also buy contingent business insurance to protect themselves from the fallout from a disaster that befalls a critical supplier—for example, a company that custom-manufactures a part that your company depends on to produce its own goods.

"If [a disaster] shuts down a business and it affects your business, it helps to defray the costs," Worters says.

As many companies have learned, property and casualty insurance can also have its limits. Damage from flooding is not covered by a typical commercial package; it must be purchased separately. The same goes for earthquake insurance.

Many insurance companies offer identity theft coverage with various maximum limits and some with no deductible to cover expenses to clear up the havoc that identity theft can cause.

These costs can include costs of executing affidavits, lost income replacement (limitations apply), loan re-application fees, attorney fees, and even the cost of long distance phone calls.

Insurance companies also may offer additional free services to assist you in identifying fraudulent accounts, notify credit reporting agencies, help you file police reports, offer legal support, translation services, contact creditors on your behalf and many other helpful areas.

Also, some insurance carriers may offer free credit monitoring services that will be able to keep a constant watch on your credit report and alert you of any unusual changes to your accounts.