5 Basics of Business Interruption Insurance

The biggest misconception about business interruption insurance is that it will cover lost profits from any unplanned business closure; however, that’s not the case. The business closure must have happened as the result of a covered peril in order for business interruption coverage to kick in.

Here are three other common misconceptions about business interruption insurance:

  1. Insureds sometimes think business interruption coverage pays for every cent of lost profits. In fact, it replaces net income that would have been earned during the covered loss ** ** plus ** ** the cost of normal operating expenses.
  2. Insureds sometimes believe business interruption coverage will continue until the business has fully recovered from the loss event. In fact, coverage only extends to a “period of restoration,” or a reasonable amount of time to repair or rebuild damaged property.
  3. Businesses sometimes believe that business interruption insurance will cover losses after a supplier or utility goes out of commission. But a policy would need to include a “service interruption” endorsement to trigger this type of coverage.

Here are 5 basics of business interruption insurance

1. Business interruption is not a standalone insurance policy. It’s typically offered as part of a commercial property policy or business owners’ policy.

2. Business interruption insurance generally covers lost income after a covered claim (from afire or weather event, for instance) triggers a commercial property insurance claim.

3. Common business interruption policy exclusions include acts of war, nuclear accidents, losses due to bacteria, viruses or communicable diseases, and pandemics.

4. Business interruption insurance is different from civil authority coverage, which is triggered when a local, state or other government entity closes a business due to physical damage to a nearby property. In other words, there may be coverage if an insured property is forced to close due to government action.

5. When there is no physical damage to a business from a covered event such as a fire, business interruption insurance isn’t likely to pay.

Not sure what is covered and what is not, contact the agency to discuss.

Reprinting from PropertyCasualty360 article.