How Business Interruption Insurance Can Limit Your Losses After a Fire

4/13/2022 (Permalink)

Know More about Business Interruption Insurance by Following These Tips.

A commercial fire can be harmful in multiple ways. Obviously, a blaze puts you and your workers at risk. Even if everyone does come out of the disaster unscathed, you will then have to start the fire restoration process.

Top fire cleanup experts can get your property back to normal quickly. However, you may still have to shut down your White Bear Lake, MN, business for several days during the remediation.

To limit the harm that this closure does to your company, you should purchase business income insurance, which is also called interruption insurance.

Why You Need Business Interruption Coverage

The National Fire Protection Association determined that indirect property losses from fires cost $1.9 billion in 2014. This included $0.46 billion in indirect damage to industrial and manufacturing facilities, and $0.17 billion in indirect damage to other non-residential structures.

Business interruption coverage can alleviate some of these costs. This type of insurance typically covers the following:

1. Lost Profits

The insurance policy will give your company the amount of money it would have earned had the fire not occurred. Insurance providers base these payouts on the prior month's documented income. Any earnings not listed on your financial records will be excluded. It is thus important to keep track of exactly how much profit you make each month.

2. Extra Expenses

While your business headquarters is being repaired, you may have to temporarily move your company to a new location. Interruption coverage can pay for the cost of renting this new facility. Your policy may also help you replace damaged machines.

3. Operating Expenses and Employee Wages

Most interruption policies cover business operating expenses and other fixed costs involved in running your company. This includes the wages and/or salaries for your employees. After all, your workers may not want to return to the job unless they are getting paid.

4. Loan Payments and Taxes

Your lenders likely will still want their monthly payments even if a fire has damaged your business. Interruption coverage should cover the costs of those loans and ensure you can pay your business taxes on time.

What Is Not Covered Under Business Income Insurance

Unfortunately, not all business-related losses are included in interruption insurance. Damage caused by earthquakes and floods, for example, is usually part of a separate policy. Business income insurance also will not cover the cost of utilities or reimburse you for replacing broken items. However, the latter expense may be part of your main insurance coverage.

How Business Income Insurance Works

Business income insurance is typically added on to a regular commercial policy. The policy usually covers losses from the date of the covered peril to the date the property is back in the same condition it was pre-disaster. This time frame is often called the "restoration period."

Most policies provide a restoration period of 30 days. However, if you are worried about a more severe disaster, you can extend the restoration period to 360 days. Keep in mind that there may be a two to three day waiting period before the coverage begins.

Fires cost companies more than $1 billion in indirect damage each year. With interruption insurance, you can mitigate your losses.