What is Business Interruption? And what is Business Interruption insurance? Perhaps you’ve heard the term “Business Interruption” and can get a general idea of the concept from context clues. But what are the parameters for an event to qualify as a “Business Interruption?” And how can a business actually obtain insurance for such occasions? These questions will be answered in today’s blog post providing an overview of Business Interruption. From the perspective of the insurance carrier: the insurer will pay for the actual loss of business income sustained from a necessary suspension of operations due to a covered cause of loss per the insurance policy. In other words, business interruption insurance covers the loss of income suffered by a business after a physical disaster or damaging event with the purpose being to pay the policyholder for the financial loss sustained as a direct result of the covered peril per the policy.
Covered events are always outlined and defined in the policy, and some events commonly covered by insurance would be natural disasters, fires, floods, gas leaks, burglaries, government action and mandatory shut-downs, and anything else outlined as a covered event in the policy. Recent events such as the fires in California a few years ago in 2018 or the Dallas tornado that came through in October of 2019 are a few commonly-known events for which we have worked on claims and would be commonly-covered perils for business interruption insurance. It is vital to reiterate: insurance claim coverage and calculations are stipulated and dictated by the insurance policy.
While this kind of insurance is different from property insurance in that it does not pay for the replacement or rebuilding of physical damages, it is similar in that physical damage that inhibited operations must have occurred; there is some physical loss or disturbance of the property that makes the insured unable to earn the same level of profits as before the covered damaging event occurred. The purpose of business interruption insurance is to do for the policyholder what the business would have done for itself had the damaging event not occurred, had there been no interruption of operations. The policy is intended to provide for the insured the actual financial loss- no more, no less- sustained by the business during the time necessary to restore the damaged property and for the business to resume operations, the calculation of which is also based on the specifics stipulated in the insurance policy.
Here at Ahuja & Clark, our seasoned financial experts are equipped with the knowledge and experience needed to assist with business interruption loss claim calculations. If you are interested in a consultation or retaining us and our services, give us a call at (469) 467-4660.