Business Interruption Insurance Claim

Business insurance policies vary from insurance company to insurance company, but business interruption coverage typically includes compensation for:

Lost revenue – based on prior financial records
Mortgage, rent and lease payments
Employee payroll
Taxes and loan payments due during the covered period
Relocation costs – if the business must move to a new or temporary location due to physical damage to the business premises.

Tips for Filing a Business Interruption Insurance Claim

Step 1: Read Your Policy

Find your declaration sheet and policy details. Read them carefully to determine if you have coverage for COVID-19. It is possible that you will not be able to discern your coverage, due to the complexities of insurance language. Don’t be discouraged—simply contact your agent or attorney to get their take on whether your policy considers COVID-19 to be a covered event. Keep this in mind: even if you think you may not qualify, you cannot know for sure if you do not ask.

Step 2: Keep an Eye on the Time

Many policies require timely notice. Timeframes vary by policy, so make sure you are aware of what your policy specifies. Even if you are covered for COVID-19, your claim may be denied if you fail to give timely notice.

Step 3: File a Claim

Reach out to your insurance agent to notify them that you want to file a claim. He or she will provide you with the requisite reporting documentation. This will also create a record of your initial loss date in their system, which can help you avoid issues with policy reporting deadlines.

Step 4: Keep Thorough Records

Utilizing the tools that your insurance company offers, be sure to aggregate and maintain thorough evidence of loss. Most insurers provide worksheets to assist with the reporting process. Your ability to collect complete data on customer and sales activity—including cyclical effects—will assist in the claims process. Focus on gathering data in the following areas:

Loss of customers and sales
Fixed costs
Extra costs incurred
Cost savings
Step 5: Calculate Income Loss

Unlike physical losses, business interruption losses take place over a period of time. Remember that you are entitled to recovery for the entirety of the loss caused by a covered event. It is tricky to calculate business income loss because it does not take place at one point in time. The correct loss calculation will fully compensate for the lost income during the loss period.

Here are some tips for calculating income loss:

For some businesses, the period of damage will be relatively brief and well defined. The lost business will be restored when they are allowed to re-open their doors. While they may have some lingering expenses, perhaps in the form of incremental borrowing costs due to debt they took out to operate during the closure, the bulk of the damage may be over once they re-open.
For some businesses, the damage period may be longer, or even indefinite. Depending on your policy, the claim process may be different. It is possible you will need to estimate your period of damage before the recovery is complete. There are many ways to do this and it can be quite complex.
Please note: You should make sure that you are doing everything you can to mitigate your losses and ensure as rapid a recovery as possible. You are not entitled to recovery for damages that could have been avoided.