The Cost of a Business Interruption Is Covered by Insurance

10/31/2019 (Permalink)

Fire cleanup was necessary for this ceiling in Cedar City.

Disaster has struck. It’s a dark day in Cedar City. Your business has completely shut down. Was it fire or storm damage? It doesn’t matter. There is much to be done between now and the day you can reopen. Unfortunately, there was a lot of damage and reopening is a long way off. While you are assessing the situation, your insurance agent reminds you about the interruption insurance portion of your policy and describes some of the costs that it can cover.

Expenses After a Disaster

1. Costs Associated With Moving to a Temporary Location

If your business can operate from anywhere and your policy covers it, you can restart your business at a temporary location. This can shorten the business interruption dramatically. It will allow you to continue your operation, keep your customers satisfied and make your employees happy that they still have jobs.

2. Lost Profits But Not Lost Revenue

If your business is profitable and you can document profitability, you will be reimbursed for profit lost. Some people mistakenly believe that interruption insurance covers the insured for lost revenue but that is not the case.

3. Fixed Costs

The government wants you to pay your property taxes. Your landlord expects you to pay the rent. Behind them, there are others standing in line to get paid. They don’t care that you are temporarily out of business.

4. Training Costs

Unless you set up your business to operate at a temporary location, it’s a good bet that you will permanently lose many of your employees. New employees will need to be trained to do the jobs, and training costs money.

5. Other Expenses

There will always be other expenses that don’t fit in the above categories. There could be loan payments, utilities, association dues and contractual obligations.

A Short Interruption Is Good for Everyone

Your insurer wants the interruption insurance payments to end. You want things back to normal. If your repairs include fire restoration, consider bringing in a team of restoration experts. You will be happy you did.