July 30, 2024
![A Guide to Business Interruption Insurance](https://www.risk-strategies.com/hubfs/RM%20-%20Fire.jpg)
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Events outside your control can bring your business to a screeching halt. After one of your best quarters, a wildfire could engulf your warehouse in flames. A hurricane could destroy your hotel’s roof, forcing you to shut down for weeks and costing millions of dollars in lost revenue.
Business interruption (BI) insurance is part of a property insurance policy and is a business owner’s best friend when that worst-case scenario hits. Here’s a guide to BI coverage — what you need to know, and do, to keep your company on track.
When disaster strikes, business interruption (BI) insurance can replace lost profit and continuing fixed expenses, as well as items such as:
To be covered under a BI policy, your business pause must relate directly to physical loss or damage to your insured property by a covered peril.
Business interruption risks range broadly — from heavy rain causing water damage that shuts you down for a week to ongoing wildfires pausing operations for months. In the past three years, unprecedented BI losses have stemmed from:
BI is not cut and dry. All these perils could impact your business. By working with a team of experts, you can understand the complexities within your policy and make sure you’re covered.
Pre-loss claims management can be just as important as how you handle your claim after a loss. Set yourself up for business interruption coverage success using the following tactics:
1. Review the business interruption section of your property insurance policy
2. Understand property and business interruption values
3. Establish claims management protocols, disaster recovery, and contingency plans
4. Build your team
Internal
External
The early days after a business interruption event are key. These 10 steps can make the claims process smoother:
Business interruption claims are complex — filled with projections, assumptions, and “what ifs”. Settling a BI claim requires managing expectations, heaps of evidence, and a willingness to negotiate. Claim settlement can be cooperative yet tense at the same time.
Understand the unique facts and circumstances surrounding your claim and policy. Make sure to support everything with documented proof. You’ll have a better chance of success if you consider the viewpoint of the insurer. Understand the strengths and weaknesses of the claim and anticipate where they might push back.
Here are some of the documents insurers may request to substantiate your claim:
They may require additional documentation to measure the claim.
When you reach the negotiating table and are face to face with the insurance company, resolve your differences item by item. The carrier may soften after finding areas of agreement elsewhere. Compromise can be a beautiful thing. If neither side is willing to compromise, it could lead to appraisal or litigation — both costly and lengthy processes.
If you prepare a credible claim, you can get paid more quickly, and all parties are happier.
A natural disaster or an equipment failure doesn’t have to derail your business. By working with an experienced team and adopting key BI claim strategies, you can get the outcome you need to come back better than ever.
The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.