06 Aug Business Interruption Insurance
What is Business Interruption Insurance?
Business interruption insurance is a type of insurance coverage that insures business income lost and extra expenses as a result of a business interruption event, in other words, your insurance carrier provides financial reimbursement if your business has to close it’s doors unexpectedly.
Business interruption coverage is typically part of a business owner’s insurance policy. Covered perils typically include theft, fire, wind, falling objects, or lightning. If your business experienced a covered peril that forced you to shut your doors, business interruption coverage might be able to assist your business in two ways.
Imagine that you own a clothing store. Your store sells items on-site, but you also sell merchandise online. A fire at your store destroyed merchandise and made the building uninhabitable.
Your business interruption insurance covers…
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- Lost Income from the destroyed merchandise (minus the expenses you may have already paid, such as shipping for online orders).
- Your pre-loss earnings are the basis for reimbursement under business interruption coverage.
- Lost earnings are your revenues minus ongoing expenses.
- Extra Expenses if you must temporarily relocate your business because of the fire (for example, the cost of rent at the temporary location).
- Lost Income from the destroyed merchandise (minus the expenses you may have already paid, such as shipping for online orders).
Keep in mind, business interruption insurance is subject to a coverage limit. A coverage limit is a maximum amount your insurer will pay toward your claim, and any losses that exceed that maximum amount are typically your responsibility. You can choose your maximum amount, but you need to choose the maximum amount that makes sense for your business.
Ask yourself…
- How long do you think it would take to get your business operational again after a loss?
- How well protected is the building?
- Are the fire alarms and sprinkler systems in the building up-to-date and functional?
- How at risk is your building for one of the covered perils?
- How easily can you find another available commercial space if need be?
- Is comparable commercial space readily available in your area?
- How long would it take to find a temporary location? Days, weeks, a month-or-more?
- How long do you think it would take to get set up in this replacement space? Days, weeks, etc?
How long does business interruption coverage last?
Most business interruption coverage has what’s known as a restoration period. A restoration period for business interruption coverage is the length of time that your insurance company will provide financial assistance for your claim. The restoration period can begin after a certain amount of time and will end after a certain amount of time. Your coverage only applies within that timeframe. The restoration period typically begins within 72 hours of the peril and typically ends 365 days after the peril.
Note: If your restoration takes longer than the time allotted in the restoration period, you won’t receive reimbursements outside of that time frame.
Business Interruption Restoration Period Infographic
Filing a Business Interruption Claim
If you think you may need to file a claim, you need evidence of the damages and to prevent further losses. Never enter a dangerous space. If it’s not safe for you to do so, let the insurance company document the damages rather than put yourself or others in danger. If it’s safe to do so, take pictures and video of the damages. Save all receipts and bills for losses, repairs, etc.
If you can, prevent further damages and losses. If a strong storm caused the loss, the insurance company will expect you to board up broken windows and doors, and to prevent further damages to the structure and any salvageable items once it’s safe to do so.
Do you have questions about Business Interruption, your existing coverage, or are you looking for a free, no-obligation commercial insurance quote? Call Sava Insurance Group, today!
860-437-7282
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