Business interruption insurance will help to cover loss of income and also help to cover expenses associated with getting back up and running and also day-to-day expenses. It could be added as a part of a business owner’s policy or it could be an add-on to a commercial property policy.
What Business Interruption Insurance Covers
Business interruption is a coverage that’s added to a property insurance policy, alongside coverage for a building or for business contents or personal property. If you have a property policy and you have some kind of property loss or damage to the building or the business’s personal property that’s covered by the policy, that is what triggers business interruption coverage.
Business Interruption Insurance
Business interruption coverage is intended to work alongside the property portion of the policy. It’s not independent coverage, it works in tandem along with it. The coverage is intended to provide loss of income during the time that the property is damaged until the property has been restored or replaced.
Why Power Outages Often Aren’t Covered
Two examples of places where there is generally no coverage for business interruption were brought to mind by Hurricane Ida. One being power failure, the other being flooding.
Hurricane Ida knocked out all of the power to the entire city of New Orleans. Some businesses were directly impacted by the hurricane, and because they were damaged and there was a power failure at the premises location because of that damage, if they have business interruption coverage, it will likely provide the lost income while the business is being repaired. But there were many that weren’t damaged at all as far as the business itself is concerned.
The reason that they have no power has to do with damage to the power company’s lines or infrastructure. In that situation, where you simply don’t have power at your location because of damage that has nothing to do with your property that’s covered on your policy, the business interruption coverage might not get triggered.
That’s why these large-scale power outages are so financially damaging to small businesses: most have no coverage, or very little, for that kind of event.
Endorsements That May Help
Depending on where you are in the country and the type of policies available, there may be an endorsement that can help you offset and trigger that business interruption coverage. It’s commonly called off-premises power failure, though the specific endorsement might be called something different for a specific carrier.
The idea is that there may be coverage if there is the same type of damage that would be covered at your location to the power company’s infrastructure, which caused you to lose power and lose income. These endorsements are all different and different companies handle it different ways.
Preparing for Power Outages Without Coverage
If you can’t buy these extra coverages, or they’re just outright not available to you, that means you have to make those preparations for these types of events part of your regular business planning. As an example, in Florida it’s one of the reasons why so many businesses invest in generators, because power outages are a normal occurrence during hurricane season.
Investing in the process and equipment necessary to install a generator is a good investment that pays dividends during these times.
Filing a Claim Regardless of Assumed Coverage
Regardless of whether you believe, or even your agent believes, that there is coverage on your policy for a power outage situation, you should still file the claim with your insurance carrier. Every claim depends on the specifics, and exceptions may trigger coverage.
You don’t want to miss out on having coverage on your policy simply because you had the idea that this isn’t covered. File that claim, let the carrier make the determination, and talk to your agent to see if there are any events that might trigger coverage.
Business Interruption Coverage Duration
Typically, a base form provides coverage for a loss that you sustain during what’s known as the period of restoration, which usually occurs within a specific number of consecutive days after the date of physical loss or damage. However, it’s possible to obtain extended periods of 12 months or longer.
What the General Public Doesn’t See
What the general public sees usually is the loss of the property. If you lose a building, or a boiler explodes at a power station, you see the physical damage, which can cost millions. What isn’t seen is the business interruption part.
