What Does Business Interruption Insurance Cover?

As many businesses recover from COVID-19 and prepare for any other misfortunes that may come, business interruption insurance has become something for all business owners to consider. Those who were hit hardest by all the shutdowns among businesses were those who had no support whatsoever while they were closed. Those with business interruption insurance had some funds to keep their businesses going, even if only for a bit longer than others. 

But you shouldn’t make regular insurance payments for coverage that protects your business in only one situation. You should look for a coverage plan that protects your business in various situations. Interruption insurance isn’t the most common plan around, so it’s understandable if even knowledgeable business owners don’t know about it. It benefits you to learn everything that interruption insurance covers. 

Even if you already have insurance, you should make sure you understand everything it’s supposed to cover. Business interruption insurance companies are like any other insurance provider. They don’t make money by supplying you with the support you need, so they’ll commonly try to get out of it. Know what coverage you should have so you’re always getting what you need. 

If you’re denied the insurance you paid for, contact the interruption insurance attorneys at MVSK Law for support.

What Does Business Interruption Insurance Cover?

The amount that you get depends on your business’s gross earnings and future profit projections. Some industries don’t have as much financial risk as some other more common industries. This makes more sense when you consider what interruption insurance covers, such as: 

• Lost net income: Insurance providers use your business’s accounting and financial records to determine how much income your business should bring in. They will then provide coverage to cover your lost net income when you need it.
• Mortgage, rent, and lease payments: Any regular payments that have to do with the physical location of your business are covered by insurance. If your employees all work from home the majority of their work hours, your insurance will not cover any mortgage, rent, or lease payments they owe as individuals.
• Loan payments: If you took out a loan to start your business or make a large purchase to further your business, insurance can cover these payments.
• Taxes: Business coverage typically only covers taxes directly applied to your business. Any that apply to your personal income or individual status as an American citizen will not be covered.
• Employee Payroll: While some businesses can operate without employees, many can’t. To keep employees from looking for other places of employment, many businesses need to pay them even when they can’t work. Insurance policies can cover that.

These are all ongoing payments that a business has to maintain to keep the lights on. Without them, their business will be shut down, go bankrupt, and/or be left unable to reopen after a business emergency is over. These ongoing payments, more often than not, are consistent payments that rarely change over time. One of the reasons insurance providers only cover these payments is because they’re known quantities. There’s far less risk involved than some other business payments.

What Does Business Interruption Insurance NOT Cover?

Now, based on what business interruption insurance covers, it’s easier to explain what it does not cover. One-time-only events or disruptions are not covered by business interruption insurance. They are often covered by other insurance providers. These include expenses like:

• Broken or stolen equipment: Whether the equipment is damaged from an equipment malfunction, an employee or customer breaking it, or stolen in a break-in, one-off equipment is not covered by business interruption insurance. Equipment insurance covers these expenses.

• Natural disaster: Damage sustained directly from weather and climate events like hurricanes, floods, and earthquakes is not covered by interruption insurance.

• Undocumented income: If you pay some employers or contractors under the table or they make a large amount of their income through tips, these expenses are not covered by insurance.

• Utilities: While utilities are expenses you pay regularly, the cost is not consistent. Insurance providers view them as different payments that happen around the same time. While you can enter contracts with utility providers to have the same cost month-to-month, this is still not something your provider will cover.

• Pandemics: This can be a bit confusing because if your business incurs damage directly due to pandemic-related events, such as a lawsuit, or an infection among your staff, your insurance won’t cover it. But, if your business is shut down, you would need support for other costs that insurance explicitly does cover.

With broken equipment, natural disasters, and pandemics, there are exceptions or loopholes where your insurance provider should still support you. While they won’t cover the costs of any one-off damages caused directly by what we just named, if these events cause your business to close down, your insurance will cover ongoing costs. So if you had business interruption insurance during COVID-19, you should have received insurance payouts for ongoing costs. The same would be true of your business closing due to a natural disaster.

Contact the Interruption Insurance Attorneys at MVSK Law

If your insurance provider isn’t providing you with the support you paid for, Mazzoni Valvano Szewczyk & Karam can help. Our attorneys have experience helping small businesses receive the coverage their insurance providers promised, but denied them. We can help you understand when you should receive payment and if you have truly been denied. Then we can formulate a legal statement and suit to give to your insurance to push them to give you the money you paid for.

For help, contact the interruption insurance attorneys at MVSK Law as soon as possible.