When a major disaster forces local businesses to shut down their operations, the loss of revenue can be enough to prevent them from being able to open their doors again forever. According to a report from the Federal Emergency Management Agency (FEMA), a whopping 40 percent of businesses are not able reopen following a major disaster. Standard commercial insurance policies can provide compensation for the physical damage to a business property, but they do not provide reimbursement for lost revenue or other similar non-physical damages.
Business interruption insurance (BI), also sometimes called business income insurance, is a type of coverage that is designed to cover lost income when an insured business has to temporarily close because of events beyond their control. BI can help business owners recoup the loss of income that their business has suffered during the period of restoration following a major disaster and leave them in the same financial position they would have been in if no revenue loss had occurred.
What Does Business Interruption Insurance Cover?
Business interruption insurance typically provides coverage for three main areas, as long as the losses were caused by direct physical loss, damage or destruction to the business’s property following a covered form of peril. The three main areas are:
- Profits that would have been earned if the covered incident had not occurred.
- Normal fixed operating expenses that were incurred even though the business was not in operation such as employee wages, rent or mortgage, taxes, loan payments, etc.
- Expenses incurred while operating the business from a temporary location.
What Does Business Interruption Insurance Exclude?
All insurance policies have exclusions and limitations, including Business Interruption Insurance. For example, if an event not covered by the business’s property insurance keeps them from operating, BI coverage will not apply. Some additional exclusions may include:
- Utility services, which are usually suspended when a location can’t be used for business and are not typically considered a fixed expense under BI coverage.
- Any income that wasn’t properly documented prior to the loss. It’s very important to keep accurate records so that losses can be projected properly.
- Business operations that are damaged but not fully halted. For example, a downed tree causes damage to a storage area, but the business is still able to serve their customers.
- Closures due to downed power lines are not covered, as power outages are common following a major disaster, and power is usually restored as quickly as possible.
Business interruption insurance is a vital addition to any coastal business’s property insurance policy. It’s an extra layer of protection that, for a business owner, can mean the difference between coming back from a major disaster event or closing their doors forever.
Formed in 2013, AmSuisse, Inc. has quickly distinguished itself as a wholesale operation that specializes in working very closely with our agents and broker partners to develop responsive, individualized service for each client. Our unparalleled writing support, industry-specific expertise, marketing support, responsive proposals and quotes, strong customer service, and strong relationships with our carrier partners have all helped us to provide the best possible coverage for our clients. To learn more about our available coverage, contact us today at (800) 485-0229 to speak with one of our representatives.