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How Business Interruption Insurance Works

How Business Interruption Insurance Works

Business interruption insurance can be a valuable tool for business owners to have. While nobody ever wants to experience a significant reduction in their business, there are times when this can occur. Whether due to a natural disaster or the rebuilding after a major event, it is vital that business owners understand how business interruption insurance works. This is especially the case as California and the US struggle due to the effects of COVID-19. At Bentley & More LLP, our California business interruption insurance attorneys are dedicated to helping clients get through any situation they may encounter and help determine what is eligible under their business interruption insurance policy.

Business interruption insurance basics

Like any insurance you purchase, business interruption insurance is designed to help cover losses in the event something happens that causes a financial loss for the policyholder. Specifically, this insurance will help if your business is shut down due to a major event. This could include:

  • Natural catastrophe (earthquake, fire, flood)
  • Fire or explosion
  • Water damage
  • Supplier failure
  • Machinery breakdown
  • Loss of electricity or running water
  • Cyber-attacks on the business
  • Crime or vandalism
  • Supply chain disruptions

When these events occur, they can completely shut down a business’s operations. Business interruption insurance compensates the business for lost income when the company must shut down due to physical property damage or a civil order requiring the business to close. This type of insurance is typically an “add-on” to a person’s regular business insurance policy, but it can be built into a comprehensive insurance package for the business.

Business interruption insurance is designed to put the business in the same financial position it would have been in had no loss occurred. This can include profits, fixed costs, temporary location costs, commission and training costs, etc.

How long does business interruption insurance last?

Typically, business interruption insurance lasts for only a certain period of time, called the “period of restoration.” This period will start from the date that business operations ceased to the date of completion of repairs or when the property is returned to the same operating condition as before the disaster or shutdown occurred. An insurance carrier may have various terms that can prescribe to cover:

  • A specified amount of time
  • A maximum dollar coverage amount
  • A maximum recovery per month

Income losses need to be proven

While business interruption insurance policies can be beneficial, the policyholder will need to prove their losses in order to make a claim. It is important to understand that insurance carriers are “for-profit” corporations that will do what they can to lower the amount of money they pay out in a claim.

Business owners should gather all evidence of their losses in these situations. They can do so by gathering:

  • Historical profit and loss statements
  • Tax returns
  • Rent rolls

Contact a lawyer for help today

If you have any questions regarding your business interruption insurance policy, please contact the knowledgeable and experienced legal team at Bentley & More LLP to help you through this. We know that this is a trying time for all businesses. The COVID-19 pandemic has changed the ways businesses operate, with many companies having to completely shut their doors. Our Orange County personal injury lawyers will look at every aspect of your claim and work to ensure you receive the compensation you need. When you need a California business interruption insurance lawyer, you can contact us for a free consultation by clicking here.