Whenever a natural disaster occurs, it is not uncommon for businesses located in that area or in the nearby damaged areas to have access to their businesses denied by civil authorities. This is usually for the safety of the public. However, in the matter of business insurance, would the loss of the use of their premises be covered? Here’s what you should know about business insurance and how it deals with interruption.
What is Business Interruption Insurance?
Business interruption insurance helps to protect against the loss of income that comes with any peril that affects a business. Typically, this would cover events like fire, wind, falling objects, or lightning that interrupt the normal operation of a business. But there may not be civil authority coverage, which is where civil authority prevents access to a business.
Keep in mind that business interruption insurance only applies to the loss of wages that would occur and does not cover any damage that occurs to the building. That is what the property coverage in a business owner’s policy covers.
Business Interruption and Restoration Period
There is likely a restoration period present in an interruption coverage policy. This is the length of time that your policy will cover for lost income and extra expenses while you restore your business after a covered claim. It’s important that you read the terms of the policy so that you understand when this restoration period starts and how long it lasts. There is usually a period of 48 to 72 hours before restoration kicks in, but it can last up to 12 months.
This means that if building repairs aren’t completed in a 12-month period then the interruption coverage would expire and reimbursement would stop.
Obtaining Civil Authority Insurance Requirements
Before you can apply for civil authority insurance, some conditions must first be met.
- Denial of access to the business must be due to an incident of physical damage to a nearby property.
- Damage to that nearby property must be due to a peril that is covered under your insurance policy.
- There is a limit to the length of time the business interruption coverage applies, which is usually between 15 and 30 days.
- Business interruption coverage almost always has a deductible in the form of a waiting period, which can be between 24 and 72 hours.
If all of these conditions are met, then you’re likely to start collecting on civil authority business interruption coverage.
Getting The Right Amount of Coverage
Most insurance policies for business interruption insurance usually have a coverage limit. Any financial losses that are incurred that exceed your limit will end up being your responsibility. That’s why it’s important to choose coverage limits that are appropriate for your type of business. You should ask yourself questions like “how long would it take to get your business back up and running after a loss” or “how well protected is the building if you are renting office space.”
It’s important that you examine the coverage limits on your insurance policy for your business to see exactly what you’re covered for. Not knowing the details of your policy could force you to spend a lot of out-of-pocket money that you weren’t prepared for.