What is business interruption coverage?
The interruption of business operations due to property loss or damage caused by a covered peril such as theft and vandalism, a fire or natural disaster, usually resulting in loss of business income, loss of profits, or extra expense.
Business interruption coverage is intended to return the amount of profit the business would have earned had there been no interruption of the business.
Business income loss is the actual loss of Business Income you sustain due to the necessary suspension of business operations during a period of restoration, however suffering economic losses without physical damage is typically insufficient to trigger Business Income coverage.
When certain criteria are met, some policies provide coverage for Business Interruption resulting from:
- Civil Authority orders
- Ingress/Egress issues
- Service Interruption (utility and/or data)
- Damage to attraction properties
- Contingent Business Interruption
What is business income loss?
Business Income coverage is typically triggered when there is direct physical loss or damage to covered property caused by a covered cause of loss which causes a suspension of business operations.
Determining the amount of a Business Interruption loss depends on the period of time a business is interrupted as a result of having to repair the damage, i.e., the Period of Restoration.
Coverage for loss of business income is typically only afforded during the “period of restoration.” Some policies contain an “extended period of restoration.”
Period of restoration
Determining the amount of a Business Interruption loss depends on the period of time a business is interrupted as a result of having to repair the damage, i.e., the Period of Restoration.
Coverage for loss of business income is typically only afforded during the “period of restoration.” Some policies contain an “extended period of restoration.”
The Period of Restoration begins after the time of direct physical loss or damage, after any applicable waiting periods have been satisfied.
The Period of Restoration typically ends when the property is repaired, rebuilt, or replaced with exercise of due diligence. Some policies limit the period of restoration to a maximum duration (e.g., 360 days).
Certain policies also include an “extended period of liability or restoration” which provides coverage for business income loss realized during a ramp up period after repairs have been completed.
Extra expenses during business interruptions
Extra expenses are necessary expenses incurred during the “period of restoration” that would not have been incurred if there had been no direct physical loss or damage to property.
Some policies only provide coverage for extra expenses incurred to avoid or minimize the “suspension” of business and to continue operations.
Similar to the requirements for business income coverage, policies containing this or similar definitions of extra expense also require direct physical loss or damage to the property. Policies can differ, but some common examples of operating expenses covered by this kind of insurance include:
- If you have to relocate your company because of a covered emergency, this policy will help pay for the extra costs associated with that move.
- If you have to temporarily or permanently relocate your business due to a covered event, this policy can help pay for the costs associated with doing so.
- Business interruption coverage can also help pay for things like the loss of business records and temporary employee costs.
- Business interruption insurance can help pay for the training cost for personnel to learn how to operate new equipment.
- Extra expenses required to keep the business running.
- Taxes and routine bills.
- Payroll expenses.
- Mortgage, lease and loan payments.
Filing a Business Interruption insurance claim
Claims Aid Consultants Public Adjusters are skilled, knowledgeable and experienced loss experts who provide claim adjusting services exclusively to policyholders. We prepare the necessary documentation for your claim and negotiate your loss with the insurance company’s representative so you receive the best possible insurance settlement.
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