13 Jun What Business Owners Should Know About Business Interruption Insurance
Business owners might have seen an increase in cost to their commercial property insurance policies in 2018. That was because of the 2017 hurricane season which saw Harvey, Irma, and Maria cause major damage to the U.S. coastline – especially Harvey in Texas and Maria in Puerto Rico.
As a business owner in Texas, especially those of you located in coastal areas or regions with significant flood risks, the importance of commercial property insurance cannot be overstated. While property insurance is essential to cover physical damages to your business, Business Interruption Insurance (or Business Income Insurance) helps to cover expenses and lost income caused by disasters such as fires or weather-related catastrophes.
Whether preparing your business for the 2018 hurricane season or any other incident that might occur, your Brownsville insurance claim lawyer at Mendez Law Firm wants to inform all Rio Grande Valley business owners of the importance of Business Interruption Insurance and how it can be the tool that saves your business when facing major disaster-related damages.
What Is Business Interruption Insurance?
Planning ahead is a must for any successful business owner, and this additional provision to your business’ property insurance policy can be crucial to protecting your business when facing an unexpected event.
There are several different types of business interruption insurance that you may be eligible to obtain through your current insurer or through another specialized agency. They are:
- Traditional business interruption insurance is intended to compensate for any potential income lost during the period it takes to repair or restore the covered property to working order.
- Extended business interruption covers, for a limited amount of time, the income lost after the property has been repaired but before income returns to previous levels.
- Contingent business interruption covers loss of income resulting from physical damage to the property of providers, suppliers, or consumers of business’ products or services.
Extended and contingent coverages can usually be purchased as extensions of traditional business interruption insurance for an added premium.
What can be covered?
As every business – even within the same industry – is different, it’s important for owners to understand that their specific policy will be unique to their needs. Every policy can cover – more or less – depending on assets you want to protect.
Generally speaking, however, business interruption insurance can cover and provide protection for:
- Profits that would have been earned (this is dependent on an analysis of prior months’ financial statements and other variables).
- Operating expenses and other fixed costs.
- If your policy covers this, you may be able to receive coverage for moving into a temporary location.
- Extra expenses beyond fixed costs that are required to keep providing services and not lose customers.
- The period of restoration or time needed to get back the full customer base can be insured as well.
Every business will have a variation of coverage, and so it is critical during the initial consultation to ask as many questions as needed to fully understand what your policy may or may not cover.
Coverage is triggered by a covered peril causing damage and will extend until the end of the period as determined by the policy.
How much coverage is needed?
Business interruption coverage is limited and any losses that exceed those limits are the business’ responsibility. In order to determine what coverages you need and what limitations are appropriate for your business, there are a number of factors that you will want to consider, including but not limited to:
- The likelihood your business will deal with a disaster.
- The types of possible disasters that could occur in the region your business is in (i.e. hurricane in coastal areas).
- How long it would take your business to start running after a loss.
- Any additional insurance provisions that can help your business in case of a disaster.
- What your most valuable asset are.
- Are there comparable commercial spaces in your area.
In areas such as the Rio Grande Valley, especially Brownsville, which can experience a major disaster such as a hurricane, it is important that policy coverages and limitations are sufficient to cover a business for more than just a few days.
Even with the right commercial property insurances in place, your insurer may attempt to underpay or outright deny a valid claim. When this happens, don’t allow bad faith insurance tactics to derail you or your business. You deserve justice and the recovery that is legally yours.