Owning and operating a business is difficult enough on its own. Hiring quality staff to ensure client needs are being met, meeting necessary deadlines, and maintaining staff morale are just a few important aspects that go into running a business. However, when the unexpected happens, it’s important for business owners to protect their livelihoods.
One way this can be accomplished is by having a business interruption insurance policy. While these policies are great to have in order to ensure the property is protected from potential damage, they can also be difficult to navigate and may lead to denied, delayed, or underpaid claims by insurers. Having a good understanding of what’s covered under a business interruption insurance policy can help business owners discern whether or not a claim can be filed.
What is Business Interruption Insurance?
Business interruption or business income insurance is a type of insurance coverage that can help business owners replace income the business lost in the event it is unable to open for an extended period of time following a covered loss. Business interruption coverage is often bundled into a business owner’s policy (BOP). These policies combine property, liability, and business interruption coverage for small and midsize businesses.
When purchasing this type of insurance coverage, it’s important that business owners ensure policy limits are sufficient to cover business losses of more than a few days – or even weeks in some cases. This is because following a major disaster that affects the business, it can take much more time to recover than most realize. Business interruption insurance coverage comes with a period of restoration attached that dictates a set length of time before which policy coverage will trigger. Typically there is a 48 to 72 hour waiting period prior before the period of restoration kicks in. In standard business interruption policies, the period of restoration is limited to 30 days, although this period can be extended by policy endorsements.
When business interruption insurance is very closely tied to a BOP, the main policy’s covered events and perils are also covered under business interruption. Events that trigger coverage under these policies typically require a showing of physical damage to the property or to a leader property nearby. Physical damage typically occurs following a storm or natural weather event, fire, and/or other types of unexpected events that cause significant physical damage to the physical location of the business.
A business interruption policy will typically cover:
Lost Revenue: Business interruption insurance can cover lost revenue for up to one full year. If the business is closed down temporarily and there is no way for it to make money outside of its physical location, this insurance will help keep the business a float during this period of time.
Missed Rent Payments: Business interruption insurance can help cover the cost of rent or lease payments to landlords while the business is recovering from a covered loss.
Loan Assistance: When triggered, business interruption coverage can offer financial assistance towards any business loans that were filed prior to the physical damage that caused the business to shut down.
Relocation: In the event it is impossible to reopen the business at its original location, business interruption coverage can be used to cover moving costs and rent payments at the new location for a limited period of time.
Employee Wages: Business interruption coverage allows employers to continue to pay their staff regularly following an unexpected closure. This allows employers to retain employees while the physical business location is not in operation.
What Isn’t Covered
Business interruption coverage can be difficult to navigate due to the stipulations that provide coverage and those that do not. While the presence of physical damage triggers coverage, it only applies to the financial losses the business sustains while being closed, not to material property damage.
More specifically, business interruption insurance does not generally cover:
Broken items resulting from a covered event or loss, such as broken glass or a damaged roof.
Flood or earthquake damage, which are covered under separate provisions or policies.
Undocumented income that’s not listed on the business’ financial records.
Pandemic events, viruses, or other communicable diseases.
What To Do If Your Insurer Denies Coverage
While business interruption insurance can provide coverage to business owners following a devastating physical loss, insurers look for ways to deny coverage altogether. Insurers may attempt to delay, underpay, or deny business owners the coverage they need. Because of this, it’s incredibly important for business owners to have a good understanding of their policy and what is and isn’t covered. While business interruption policies can be difficult to navigate, an experienced insurance attorney can help.
Houston Business Interruption Attorneys
While navigating and running a business is difficult on its own, it can be almost impossible following a devastating event that causes physical damage to the location. Although insurers will attempt to deny rightfully filed claims to avoid paying the full amount owed or paying at all, an experienced business interruption recovery law firm can help you recoup the amount you are rightfully owed under your policy.
At Raizner Law, we’ve successfully handled thousands of complex insurance disputes against major insurance companies and we will fight to get you the coverage you need. If you need assistance in navigating a business interruption claim or your claim was wrongfully denied or underpaid, contact us today for more information.