Business interruption insurance coverage is an additional type of insurance that businesses can purchase as part of their commercial property insurance, commercial package policy, or business owner’s policy. It’s meant to cover losses when your business is unable to operate because of disasters.
Generally, this insurance kicks in when your business is interrupted due to conditions such as:
- A disaster makes it impossible or very difficult to exit or enter your business.
- Your business can’t get essential services like communications or electricity because of a qualifying event.
- A government action, such as an evacuation or roadblock, impedes access to your property.
- Your business loses rental income because of a qualifying event.
Not all insurance policies are identical, and the specifics of what a policy covers depends on the details of that particular plan. However, in the midst of tragic disaster events, business disruption insurance typically helps businesses cover expenses, such as:
- Ongoing bills like rent, utilities, and employee wages
- Costs from having to operate from a temporary location
- Loss of revenue during the closure
- Added advertising needed to inform customers of operations during a business disruption
The amount of money that a business can recover from insurance is usually based on the value of what the business would have earned if the disaster hadn’t happened.
To calculate the value of what your business might be able to recover, it’s critical to gather the business’ financial records from previous years to help determine the extent of your losses. Some of the paperwork necessary for this valuation might include lists of expenses, profit and loss statements, sales projections, or past tax returns.
Business Interruption During COVID-19
Insurance policies for business disruption often cover losses only when the property experiences direct physical damage due to a qualifying event that interrupts business operations. These policies often have a number of other exclusions, limitations, or conditions as well. For example, some policies have language that precludes coverage for losses due to a virus or pandemic.
It’s critical to review the terms and conditions of your specific plan because not every insurance policy has pandemic exclusions. However, even if your policy says that you can’t get coverage for losses due to a pandemic, you might still be eligible for compensation.
Local and national authorities and lawmakers are considering changes to rules that might impact your claim, and some state legislators have already begun to act. For instance, in New Jersey, lawmakers have introduced a bill that would compel insurance companies to accept business loss claims for COVID-19 reasons.
These considerations are similar to the actions that Congress and insurance groups took after 9/11 to help businesses. In the aftermath of that disaster, insurance companies made an exception to their policy exclusions on acts of war in order to provide relief to businesses that suffered losses due to 9/11.
An example of actions that these parties might take in light of the COVID-19 pandemic is that Congress might encourage insurance companies to consider certain damages from coronavirus as physical property damage.
In fact, New York’s mayor has already said that damages from the virus should be regarded as property damage. The virus can live on surfaces for several days, and businesses might have to undertake significant cleaning of their property before they can open.
In the meantime, it’s essential to file a claim for business interruption insurance, even if you think insurance is likely to deny your claim. For one, it’s impossible to know for sure whether your claim will get denied if you don’t even try, plus you can’t file a lawsuit against the insurance company to try to get compensation unless you have already received a denial from them.
You can improve your chances of getting your claim approved by making sure your claim is as complete and convincing as possible. It’s critical to include supporting evidence, such as reports on your business’ expenses and revenue, in addition to other pertinent details like the business’ history.
Going through the process of filing a claim with your insurance company might help give you an advantage in the instance that the government enacts changes that impact business interruptions. The documentation and evidence that you will need for a claim with the government are likely to be identical or very similar to the paperwork you need for your insurance claim.