business interruption insurance

Business Interruption Insurance

Business interruption insurance can help some companies

Natural disasters and other calamities can affect any company at any time. Depending on the type of business and its financial stability, a few weeks or months of lost income can leave it struggling to turn a profit indefinitely — or force ownership to sell or close. One way to guard against this predicament is through the purchase of business interruption insurance.

The difference

You might say, “But wait! We already have commercial property insurance. Doesn’t that typically pay the costs of a disaster-related disruption?” Not exactly. Your policy may cover some of the individual repairs involved, but it won’t keep you operational.

Business interruption coverage allows you to relocate or temporarily close so you can make the necessary repairs. Essentially, the policy will provide the cash flow to cover revenues lost and expenses incurred while your normal operations are suspended.

2 types of coverage

Generally, business interruption insurance isn’t sold as a separate policy. Instead, it’s added to your existing property coverage. There are two basic types of coverage:

1. Named perils policies. Only specific occurrences listed in the policy are covered, such as fire, water damage and vandalism.

2. All-risk policies. All disasters are covered unless specifically excluded. Many all-risk policies exclude damage from earthquakes and floods, but such coverage can generally be added for an additional fee.

Business interruption insurance usually pays for income that’s lost while operations are suspended. It also covers continuing expenses — including salaries, related payroll costs and other amounts required to restart a business. Depending on the policy, additional expenses might include:

• Relocation to a temporary building (or permanent relocation if necessary),
• Replacement of inventory, machinery and parts,
• Overtime wages to make up for lost production time, and
• Advertising stating that your business is still operating.

Business interruption coverage that insures you against 100% of losses can be costly. Therefore, more common are policies that cover 80% of losses while the business shoulders the remaining 20%.

Pros and cons

As good as business interruption coverage may sound, your company might not need it if you operate in an area where major natural disasters are uncommon and your other business interruption risks are minimal. The decision on whether to buy warrants careful consideration.

First consult with your insurance agent about business interruption coverage options that could be added to your current property coverage. If you’re still interested, perhaps convene a meeting involving your agent, management team and other professional advisors to brainstorm worst-case scenarios and ask “what if” questions. After all, you don’t want to overinsure, but you also don’t want to underemphasize risk management.

Potential value

Proper insurance coverage is essential for every company. Let us help you run the numbers and assess the potential value of a business interruption policy.

Deadline for ACA information reporting

IRS extends deadlines for ACA information reporting

ACA Information Reporting

Under the Affordable Care Act (ACA), certain employers must report health care plan information to the IRS and employees. Specifically, Forms 1094/1095-B (B Forms) and Forms 1094/1095-C (C Forms) may need to be submitted for the 2017 tax year. The agency recently extended submission deadlines for these forms under some circumstances. Let’s delve into the details. Read More >

Clock money gears

Your 2017 tax return may be your last chance to take the “manufacturers’ deduction”

While many provisions of the Tax Cuts and Jobs Act (TCJA) will save businesses tax, the new law also reduces or eliminates some tax breaks for businesses. One break it eliminates is the Section 199 deduction, commonly referred to as the “manufacturers’ deduction.” When it’s available, this potentially valuable tax break can be claimed by many types of businesses beyond just manufacturing companies. Under the TCJA, 2017 is the last tax year noncorporate taxpayers can take the deduction (2018 for C corporation taxpayers). Read More >

Are Your Profits On Target?

How to prepare WIP reports for long-term contracts


Work-in-progress (WIP) is a major inventory account for manufacturers, media and film companies, construction contractors, and other entities that enter into long-term contracts. WIP reports help management gauge the profit on each long-term project. To maximize profitability, it’s essential to regularly monitor these reports.

What should be included?
There are many ways to create WIP reports, including spreadsheet programs and accounting software add-ons. Whichever method you use, the report should track key information for each project in progress, such as:
Read More >


IRS Disallows Prepayment of 2018 Real Estate Taxes

There has been substantial information in the news lately regarding prepaying next year’s real estate taxes in order to accelerate a tax deduction into 2017.  The IRS issued an advisory on December 27, 2017 basically stating that making a “deposit” for taxes to be assessed in the future does not constitute a current deductible expense for income taxes.  Here are our observations for paying real estate taxes:

  1. For Wisconsin residents, generally consider paying the real estate tax bill you received in early December by the end of the year.  However, if you are subject to alternative minimum tax in 2017, there may be no advantage to doing so.
  2. For residents of other states, it depends on the assessment period, and when you actually have a legal obligation to pay the real estate taxes.
  3. Just because your municipality has a method for making a deposit of future real estate taxes does not make such payment deductible in 2017.

Everyone’s tax situation is unique.  Please consult with our tax professionals to understand what options provide the best tax benefits to reduce your income tax burden in both 2017 and 2018.

IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017

Pat Wirth, CPA, Partner

fed govt

The 2017 Tax Cuts and Jobs Act (H.R. 1)

The 2017 Tax Cuts and Jobs Act was signed into law on December 22, 2017.  The linked publication highlights the key changes and planning opportunities of individuals and businesses: CCH House-GOP-Tax-Cuts-Job-Act.

Chortek’s tax department is analyzing the impact of the tax law changes for our individual and business clients. We will expeditiously be developing strategies as additional clarification is published on the intricacies of the tax bill.

In the meantime, do not hesitate to reach out to our tax team with your questions.

See also “Why you may want to accelerate your property tax payment into 2017



Woman looking at 100-dollar bills

Is it time to rethink your holiday bonuses?

Many employers feel obligated to hand out holiday bonuses. If you’ve been distributing such checks for years, without regard to merit or longevity, maybe it’s time to rethink this practice.

Merit-based rewards

Citing economic uncertainties or philosophical changes, some employers have done away with holiday bonuses altogether. This is an option, of course, but a better one may be to replace your across-the-board holiday bonuses with a merit-based program that rewards those who deserve extra recognition. Read More >

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The Write Stuff: A Letter of Instructions

When you draft an estate plan, the centerpiece is your will or living trust. Such a document determines who gets what, where, when and how, as well as tying up the loose ends of your estate. A valid will or living trust can be supplemented by other legally binding documents, such as trusts (or additional trusts), powers of attorney and health care directives.

But there’s still a place at the table for a document that has absolutely no legal authority: a “letter of instructions” to your heirs. This informal letter can provide valuable guidance and act as a road map to the rest of your estate. Read More >

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Are your retirement plan documents in complete agreement?

Pop quiz! What are the two legal documents that govern your company’s qualified retirement plan? It may not be a question that keeps you up at night, but it’s one that can trip up employers that sponsor such a plan.

The answer, of course, is: 1) an underlying plan document (UPD) and a summary plan description (SPD). But here’s an even scarier question — what if these two documents don’t completely agree with each other? Read More >

Man climbing wooden steps

Business owners: Put your successor in a position to succeed

When it comes time to transition your role as business owner to someone else, you’ll face many changes. One of them is becoming a mentor. As such, you’ll have to communicate clearly, show some patience and have a clear conception of what you want to accomplish before stepping down. Here are some tips on putting your successor in a position to succeed: Read More >