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How much do you know about business interruption insurance?

Wed Jul 6th, 2016 on     Insurance Claims,    

As a small business owner, you do everything in your power to ensure not just that your operations thrive, but that they are protected in the event of the unforeseeable. While this means taking steps like securing a commercial general liability insurance policy, it also means securing commercial property insurance.

For those unfamiliar with commercial property insurance, it is essentially the standard property insurance that will cover physical damages and losses. For instance, if your business is robbed of its computer systems or the roof is damaged by fire, commercial property insurance will cover the cost of replacing the stolen property or repairing the charred roof.

While both commercial general liability insurance and commercial property insurance can provide much-needed peace of mind, this is perhaps not the end of coverage needs. Indeed, small business owners may need to consider adding an endorsement or rider to their commercial property insurance policy that covers what are known as business interruption losses.  

In general, business interruption insurance — or business income insurance — is designed to cover the financial losses associated with an otherwise insurable event that causes physical damage to a business.

To illustrate, consider the above example of the roof damaged by fire. Here, the business interruption insurance could cover the following while the business is closed for repairs: lost revenue, fixed expenses (utilities, rent, etc.), expenses incurred operating from a temporary location, and even the costs of advertising the temporary location.

Some important points to keep in mind concerning business interruption insurance include:

  • Since the determination of a business interruption loss depends upon consideration of everything from profit/loss statements and projected sales to past tax returns and documentation of expenses, it’s imperative for business owners to keep accurate records.
  • If business interruption insurance is secured as a rider or endorsement to commercial property insurance, understand that it will only be extended to events covered by the underlying policy.

If you have questions or concerns relating to the denial of an otherwise valid claim under a business interruption policy or other important insurance law matters, consider speaking with an experienced legal professional as soon as possible.        

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