What Does Business Interruption Insurance Cover? How to Get the Settlement You Deserve

Unfortunately, some insurers take advantage of your inexperience. They deny or reduce your settlement, challenge certain costs, and pay less than you expected.

We’re here to help. Keep reading to discover the most common items covered by business interruption insurance, helping you get the settlement you deserve.

How Business Interruption Insurance Works

Business interruption insurance is a standard part of a business owner’s policy, or BOP. Approximately 30 to 40% of small business owners carry business interruption coverage, according to the NAIC.

If your business is affected by a covered event, then business interruption coverage covers certain costs related to that covered event.

Let’s say a fire burns down your auto repair shop. You’re unable to operate from that location as it’s being repaired. However, you’re able to lease a new location and operate from that new location. Business interruption coverage covers fixed costs related to the original location (like rent) along with relocation costs, staff training expenses, wages, and other costs associated with continuing to operate your business.

What Does Business Interruption Insurance Cover?

Business interruption insurance covers fixed expenses, relocation costs, loss of income, and other costs your business may be required to pay after a covered event.

Here are some of the most common items covered by business interruption insurance:

Revenue: If your business normally generates $10,000 per month, and your business is damaged by a covered event, then insurance can cover this loss of revenue. Typically, insurers compensate your business based on the business’s performance across prior months.

Mortgage, Rent, & Lease Payments: Business interruption insurance covers mortgage, rent, and lease payments for wherever your business is operating from. If you’re operating from a new location temporarily, for example, then insurance could cover that cost. If you’re continuing to pay mortgage or rent at your original location, then insurance could cover those costs as well.

Payroll: Business interruption coverage covers employee wages and salaries.
Loan Payments: If your business needs to make certain loan payments while waiting for repairs to complete, then business interruption coverage covers loan payments.

Taxes: Whether you pay taxes monthly or quarterly, you could receive compensation from business interruption insurance for tax payments.

Relocation Costs: Do you need to move your business to a new location? Business interruption coverage covers the cost of moving to a new location – either temporarily or permanently.

Commission & Training Costs: If you need to train new employees, hire new employees, or teach employees how to use new equipment as a result of a covered loss, then business interruption coverage could cover training costs.

Civil Authority Ingress / Egress: If your business interruption coverage has a civil authority clause, then your policy could compensate you for the forced closure of your business by a government. If a municipal, state, or federal government orders your business to close, for example, then you could receive compensation. Reasons for closure could include pandemics, government-issued curfews, or street closures.

Other Expenses Associated with Operating Your Business After a Covered Loss: Generally, business interruption insurance covers all reasonable expenses associated with operating your business after a covered loss – including fixed costs at the original location and new costs incurred at a new location.

What Isn’t Covered by Business Interruption Insurance?

Some businesses are surprised when certain damages are excluded from their business interruption coverage.

Common business interruption exclusions include:

• Flood, earthquake, and mudslide damage (unless you’ve purchased additional coverage for these events).
• Undocumented income not listed on your business’s financial records.
• Utility costs (typically, you shut off utilities after damage occurs).
• Damage linked to civil authority (say, if a local, state, or federal government orders your business to close), unless you have a civil authority clause.
• Broken items resulting from a covered event or loss. This would fall under your Business Personal Property coverage.
• Communicable diseases that cause your business to shut down.

Insurers could deny coverage based on the exclusions above. Insurers could also deny claims based on insufficient coverage, improper or insufficient documentation, or poor property maintenance, among other issues.

How to Maximize Your Business Interruption Settlement

Many insurers push back against business interruption claims. They may challenge your business to provide certain paperwork or documentation, for example, and deny your claim if you’re unable to provide this evidence.

Here are some of the best and most proven ways to maximize your settlement:

• Hire a public adjuster or attorney. Many business owners hire a public adjuster for disputes involving a large sum of money. A business interruption claim can make or break your business. In many cases, it’s worth paying the public adjuster’s fee (typically 5% to 20% of the settlement amount). In fact, public adjusters are often able to increase payout by 300% or more – or even overturn a denied claim. A public adjuster represents you, negotiates with the insurer on your behalf, and helps you get the compensation you deserve.
• Understand your policy limits and exclusions upfront. Many business owners fail to understand what’s actually covered by their policy until it’s too late. Review your insurance policy upfront to ensure you know what’s covered and what isn’t.
• Push back against your insurer. Many insurers offer a low settlement upfront because they expect you to challenge that settlement or negotiate. Don’t automatically accept the insurer’s initial offer. Review the documentation and ensure your insurer is paying for everything you expect. You paid for insurance coverage, and it’s important to get the settlement you paid for.
• Organize paperwork, documentation, and evidence. The clearer your paperwork and documentation is, the smoother your business interruption insurance claim will be. Insurers require ample documentation, especially for high-value claims, before paying a business interruption claim.

Business interruption claims tend to be complicated and messy. Many businesses hire a public adjuster to help manage complex claims.

Contact ClaimsMate today for a no-cost consultation with a public adjuster specializing in business interruption claims.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.