Covering Losses with Business Interruption Insurance | III

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Covering Losses with Business

Interruption Insurance

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When your business is shut down due to a damaging eventa fire or

windstorm, for instanceyou lose revenue. In addition, your business is
still obligated to pay its bills and may incur additional expenses as a result
of the disruption. Fortunately, if you have business interruption coverage,
many of these costs and losses can be reimbursed. Generally, business
interruption insurance will cover:

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BUSINESS INSURANCE IN DEPTH

Standard property insurance covers physical damage and losses
furniture destroyed in a fire, a storm-damaged office building or stolen
equipment. This coverage can help you pay the costs of rebuilding or
replacing damaged property. But what about losses resulting from your
businesss inability to operate because of property damage? For this type
of loss, youll need business interruption insurance, also known as
business income insurance.

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Fixed expenses, such as rent and utility costs.

Expenses of operating from a temporary location.
Your policy may cover additional extra expenses associated with the
disruptionfor instance, advertising to announce your new temporary
location.

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To receive appropriate reimbursement from your business interruption

coverage, there must be direct physical damage to the property resulting
from an insured event.
Determining a business interruption loss involves establishing what the
business would have earned had the loss not occurred. Insurance
companies take into account past tax returns, profit and loss statements,
projected sales and non-continuing expenses. It is crucial to keep very
accurate records so that your business interruption losses can be properly
projected.

Obtaining Business Interruption Coverage

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Business interruption coverage is not sold as a stand-alone policy. It can

be obtained as part of the following types of policies:
Commercial Property InsuranceYou can add an endorsement
or rider to commercial property insurance that will extend the policys
coverage to business interruption losses.
Business Owners Policy (BOP)Intended for small businesses,
this type of insurance package policy includes property, liability and
business interruption coverage.
Commercial Package Policy (CPP)CPPs are flexible policies that
can be customized with a range of options, including business
interruption coverage.
Other types of policies may include business interruption coverage for
certain circumstances. For instance, some kidnap and ransom policies will
cover business interruption loses resulting from a covered event.

Understanding the Limitations of Business

Interruption Coverage
While business interruption insurance can help your business survive a
disaster, there are limitations and exceptions to this type of coverage. If
you obtain business interruption coverage as part of a commercial
property policy, the coverage will only extend to events delineated in the

23-May-15 12:28 AM

Covering Losses with Business Interruption Insurance | III

http://www.iii.org/article/covering-losses-with-business-interruption-in...

core coverage. If your property insurance does not cover wind damage,
you cannot receive business interruption insurance if your company is
displaced because of a windstorm.
There are also time limits on business interruption coverage, so be sure to
discuss limitations and exceptions with your insurer or insurance
professional, and whether purchasing extended business income coverage
is a good option for your business.

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23-May-15 12:28 AM