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The Three Types of Business Interruption Insurance Coverage

On Behalf of | Apr 8, 2016 | Insurance Claims |

Few businesses can get back on their feet immediately after a major disaster. Operations may necessarily grind to a halt as the building undergoes repairs, damaged inventory is replaced, employees find ways to navigate damaged roads to return to work or suppliers are unable to provide supplies due to their own business interruptions.

Our Fort Lauderdale property damage attorneys regularly recommend that our business clients carry both property and business interruption insurance to provide the protections they need to recover from disasters. However, it is vital to recognize that even basic business interruption insurance may not be enough. This coverage comes in many varieties. Buying the three most common types of coverage can provide full protection for many businesses — all while possibly opening those businesses to three types of claim disputes.

The Nature of Your Business Can Affect Your Business Interruption Insurance Needs

As explained by the International Risk Management Institute (IRMI), there are three primary types of business interruption insurance:

  • Business interruption provides basic coverage to reimburse businesses for a loss of income during the period when they undergo the activities necessary to put the business property back into a usable condition. Most businesses can benefit from this coverage even though compensation ends as soon as repairs are completed.
  • Extended business interruption insurance covers a defined period between the time repairs are complete and the time when the business begins earning income. It is possible that certain businesses, such as small storefront operations, can often earn income as soon as they can open their doors. However, most companies are likely to experience a lag time between the two events and will benefit from a cushion of income for that period with the understanding that it has time limits.
  • Contingent business interruption insurance looks beyond the insured property to other connected issues that could interrupt the earnings of businesses that sustained no physical damage after an accident. For example, a disaster that destroys a major parts supplier can have a dramatic effect on an undamaged manufacturer that relies on the parts. Similarly, a store that counts on nearby communities to provide its customer base can lose sales when those customers cannot get to its premises because of road and other infrastructure damage in their areas.

Naturally, each type of insurance coverage adds premium costs to your business’ bottom line, but in the event of a loss, it is a worthwhile investment. While no company should pay for unnecessary coverage, it is important to work closely with a knowledgeable insurance agent to identify the risk factors associated with your specific business.

Additional Coverage Does Not Guarantee Full and Fair Claim Reimbursements

It is reasonable to expect the three primary forms of business interruption insurance to plug the most common holes in coverage. Unfortunately, insurance claims adjusters often find many loopholes that help them reduce or completely deny claims. They may disagree with anticipated earnings figures, or they may even adjust the starting or ending date of a time-sensitive claim to reduce the number of days of coverage.

Every day of lost income due to a disaster can have a profound effect on a business’ ability to survive a major disaster. When a claim settlement offer comes in at less than the expected value, it is time to seek legal advice. Call us at (954) 928-9568 or use our convenient online contact form to learn if legal action can help you pursue the full amount of your claim.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin