What You Need To Know About a Business Interruption Insurance

As a business owner, there are many things that you cannot anticipate, including natural disasters. 

Thankfully, there is such a thing as business interruption insurance, and it can help you stay afloat and cover your ongoing expenses while you’re closed due to a disaster. This can be valuable for owners who have to continue paying for things such as rent and employee paychecks while they’re not earning any income.

The claim you submit has to be well documented to ensure a favorable outcome and a smooth settlement process. A business interruption expert can help you with that.

Here is everything you should know about business interruption insurance and why putting together a team that includes a business interruption expert is your best bet.

What Is Business Interruption Insurance and What Does It Cover?

If your business is like any other, you most likely have insurance that covers physical damage to your property or building if you experience a natural disaster or a catastrophe like fire. Business interruption insurance is slightly different because it also covers continued expenses and loss of income while your business is closed or is going through repairs to fix the damage. 

This definition extends only to the ‘’classic’’ business interruption. There are additional two types of this insurance. The first is an extended business interruption that covers the income lost after the property was repaired but before the income returns to the level that it was before the loss.

There is also contingent business interruption that’s a bit different. It provides coverage for the loss of income that happened due to physical damage to the property of the providers or suppliers for your business.

This insurance is an add-on usually included in the standard insurance policy for businesses. Typically, business interruption policies can cover expenses such as:

1. Lease, rent, or mortgage payments

2. Loss of income 

3. Bills

4. Loan payments

5. Taxes

6. Employee salaries

7. Expenses of moving to a temporary location

8. Expenses such as rent for this temporary location

Generally, the insurance covers these expenses in case of a fire, natural disasters, or extreme weather conditions such as hurricanes or wildfires. Other policies might also cover businesses that got closed due to civil commotions, theft, and vandalism. 

The limits vary between different policies. As we described above, a policy might cover losses while the location is restored to normal for up to 12 months. In some cases, this might extend to upwards of 24 months.

Additionally, some policies have limits on how much they pay or even require the business to pay co-insurance. With the extended business interruption, the payouts might continue after the business reopens and returns to the normal level of sales activity.

Which Businesses Are Eligible For a Business Interruption Policy

Since this coverage is an add-on to the standard property insurance, any business that has a physical location and serves customers is eligible. For instance, a small business may get a policy that includes liability, property, and business interruption insurance.

Even if you’re an entrepreneur who has continuing expenses, we at OAS believe you can benefit from this insurance. Most policies have an option to include coverage for 12 months with no limits when a business ceases operations. 

The Limits of Business Interruption Insurance

Naturally, all business owners must ensure the limits of their policy can practically cover their expenses for more than just a few days. This is because it may take longer to get back in business than you anticipate. 

The coverage normally includes a restoration period that presents the time for which the policy will cover loss of income and expenses while the business is getting restored. There is usually a waiting period of 48 to 72 hours before the restoration period starts.

Still, this insurance doesn’t cover everything. For example, business interruption insurance won’t cover broken items that happened as a result of a disaster. It also doesn’t cover the events of floods or earthquakes because those are covered by other policies.

Furthermore, it doesn’t cover any source of income not listed on the financial records. The same applies to utilities. 

Lastly, if you can remember the events over the last few years, you’re aware of the damage caused by the 2020 pandemic. Unfortunately, diseases such as flu, or the aforementioned virus aren’t covered by business interruption insurance.

What to Do If Your Business Qualifies For a Claim

If you think you can start a business interruption claim, you should contact your insurance company right away and ask for a copy of your contract. You should review all the details, exclusions, how much coverage you have, and the payout requirements. 

You’ll have to have ample evidence to support your claim, such as evidence showing the loss of income. So,  document everything and consider putting together a comprehensive timeline that describes the decline of your business flow. You should also list your expenses and itemize your income during the period for which you’re filing a claim, and compare it to the same period from the last year or so.

While your agent can help with your claim, there is also the option of going with a business interruption expert.

Hiring External Help

To increase the validity of your claim, you’ll have to do many things, from reviewing the insurance policy to communicating with the insurance company. You’ll also have to keep records of any efforts you made in mitigating the damage as this can also strengthen your claim. 

This is why we suggest hiring a business interruption expert consultant to ensure the whole process of filing the claim is completed efficiently. For example, an expert will help you develop procedures that simplify the reporting process for your business interruption claim. This would take a lot of effort to do yourself as you might have to send these reports monthly or even bi-weekly.

An additional benefit of having a business interruption expert on board is that you’ll have a more credible claim as far as the insurance company is concerned.  When they review your claim, they’ll be able to tell it’s a collaborative effort. Hiring a business interruption expert will show you are dedicated to ensuring the process is as smooth as possible. 

Who Is a Business Interruption Expert?

Since businesses may experience financial difficulties for a variety of different reasons, a business interruption expert witness has the necessary knowledge to provide valuable insights into a multitude of areas. 

For instance, they may be knowledgeable in forensic accounting, damage calculation, lost profits, financial management, and so on. By getting in touch with these individuals and leveraging their services, you’ll be on your way to a successful business interruption claim.