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Why Would My Business Need Business Interruption Insurance if the Policy Doesn’t Cover Losses Due to COVID-19?


Abstract: Did your claim for business interruption coverage get denied? It’s important to determine the legitimacy of the denial before pursuing legal action. Most policies have exclusions, and business losses due to a pandemic usually aren’t covered. Find out more about what business interruption insurance does to understand it better.

Many business owners obtain property insurance to protect the physical assets of their company as well as business interruption insurance to keep operations running in the event of a disaster. How many of them take the time to read the policy, especially after ten years of signing up for the same insurance? If you are like many people today, you probably skip the fine print because you don’t expect to need it. Here’s a look at what you should understand if your insurer just turned down your request for assistance due to losses suffered as a result of the coronavirus pandemic.

What is Business Interruption Insurance?

Business interruption insurance provides funds for some of the lost income and necessary expenses arising from the situation. It is also known as business income insurance or business income coverage.

What Perils Are Covered by Your Business Insurance Policy?

The best way to understand what perils are covered by your insurance policy is to read through it. Some of the commonly covered perils include fire, lightning strikes, theft, wind damage, and falling objects.

If the interruption in your business day-to-day operations is covered by your policy, you may be able to cover some of your losses. For example, this type of policy often provides compensation for the revenue you would have made as well as the cost to relocate temporarily. It may also assist in paying rental fees, loan payments, taxes, and employee costs.

What is the Restoration Period?

Insurance policies are filled with words that have little meaning for the average individual. The definitions of these words aren’t on the tip of the tongue. The restoration period is a phrase that refers to the amount of time that you can expect to receive financial help based upon the terms of your business interruption policy.

Most policies provide coverage for a one-year period, giving you twelve months to complete repairs. Most likely, you are going to wait forty-eight to seventy-two hours before your restoration period begins.

How Do I Choose a Coverage Limit?

Just like other types of insurance policy, this one also comes with coverage limits. The policy’s limit sets a maximum value for the funds the insurer will put toward your claim. If your losses are greater than your limits, you are simply out of luck. This makes it critical that you determine an appropriate coverage limit for your business.

Points you can consider to guide you in your selection of a coverage limit:

  • How long would you need to find a temporary place to operate your business?
  • How long would you need to start your business up again?
  • Is your business location properly protected?

Documenting Initial Repairs

In many situations, a fire, storm, or theft causes damages that require immediate repairs. If you find yourself in this type of situation, take the time to document the cost. In all likelihood, your business restoration policy will cover your expenses as long as they were necessary and documented.

Business interruption coverage is important, because it can help you keep your company operating until you get back up on your feet again. While everyone understands that unexpected storms, fires, and thefts can happen, no one actually expects it to happen to their company. What kind of coverage should you have? Does your business income policy cover loss of income due to the pandemic? If you need help figuring it all out, we are here to assist you.

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