5 Business Interruption Insurance Requirements

E.J. Simonsen | Sep 19, 2015

Let’s Review

In my previous post, What is Business Interruption Insurance?  I covered what this particular insurance is and how it helps your business during temporary shutdowns.  Now you might be asking yourself, “What are the requirements if I want to file a claim?” Well, my friend, I have the answer to that very question. So let’s skip the fancy introductions and get right to it.  

Business Interruption Insurance Requirements:

  1. What’s the damage? There must be physical damage to your business property. Since this particular business insurance is usually an “add on” to the property insurance, most policies require that there must be physical loss or damage to the property first.
  1. All about location. The physical damage must be at the location described in the property policy. If your business has no damage but limited access due to damage from the property next door, policies will pay a limited amount of coverage, usually for a brief period of time.  An example would be bricks falling from the roof, destroying the sidewalk in front of your business. People and the actual business is fine but there is no way to access your business, due to the random pile of bricks falling and destroying the sidewalk. To shut down for a day to fix the pathway counts for filing a business interruption insurance claim.
  1. What happened? Damage must have been caused by an incident that the policy covers. An example is if a fire damaged an apartment building, and the result is you having to shut down business for a few weeks. Your loss of income will be covered. Now be careful about water or flood damage. There are policies that severely limit coverage for water damage, meaning that the loss of income will not be covered.
  2. Is this necessary? Physical damage MUST cause a necessary interruption to your business. If there are minor damages to the property and you want to close to do some remodeling, that is an example of unnecessary interruption. This policy term causes frequent disputes because of different opinions of what is “necessary” and “unnecessary.”
  1. Shutting Down. The loss must be caused by the business shutting down. Other factors that are not related to the physical damage, such as economic factors will not be covered. An example would be if a business owner temporarily shut down for a two month time to do remodeling, when simply fixing the damages would have required the business to close for a week. This requirement is often disputed as well, often because it is difficult to sort out exactly which possible causes lead to the closure

Stay Tuned

So by now we have a good understanding of what business interruption insurance is and what the requirements are to filing a business interruption claim. Now we are left with one more step:

"How to file a business interruption claim."

Be on the lookout for my next post that will cover that very topic.

If you have questions about an insurance claim or want to know more information on business interruption insurance, schedule a time to talk by clicking below.

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