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Business Interruption Insurance Terms to Know

Businesses are suffering amid the COVID-19 pandemic. Lack of foot traffic, governmental health regulations, shelter-in-place orders, and social distancing guidelines have made it difficult or impossible for many businesses to continue operating. Business interruption insurance is one possible solution that could allow a company to stay in business with benefits to replace lost income. If you own a business and wish to file a claim, learn common terms you need to know.

Actual Loss Sustained

Direct physical losses a business sustained due to a peril. An example would be a business with smashed windows due to a hurricane. Many business interruption insurance companies withhold benefits unless the claimant can demonstrate actual losses sustained.

Business Interruption Period

The number of days that COVID-19 or another disaster interrupted your business. Start with the day the peril impacted your profits or physical store and end with the day you were able to return to business as usual. The insurance policy will give a maximum business interruption period for coverage. Most policies have 30-day interruption periods; some, however, offer endorsements that increase the period to 360 days.

Civil Authority, Ingress/Egress

In light of COVID-19, the government has forced many nonessential businesses to close—directly causing financial losses. Civil authority and ingress/egress are types of insurance that cover business losses from governmental ordinances instead of physical damage.

Commission and Training Cost

If the business interruption event forced you to hire new personnel, retrain them on special protocols, replace machinery or take other measures, your business interruption insurance claim may cover these expenses.

Contingent Business Interruption

An interruption in the supply chain of your business. If a peril affected your suppliers, making it difficult to obtain the supplies you need to stay in business, you could file a contingent business interruption insurance claim. The same is true if a covered peril impacted the receivers of your goods or services.

Covered Peril

A type of disaster, hazard or threat to a business an insurance policy covers. A business interruption insurance company may only offer benefits for a client’s losses as long as the plan covers the peril that caused them. Common covered perils include natural disasters, fires and theft. Viruses and bacteria are often not covered perils on business interruption insurance policies due to specific exclusions.

Exclusions

Types of perils and losses a business interruption insurance policy does not cover. Policy exclusions mean the insurance company will not pay benefits for a certain type of disaster. Many policies, for example, have virus exclusions. Virus, bacteria and contamination exclusions can make it difficult for a business to obtain benefits for the coronavirus.

Insurance Premiums

An insurance premium is what you will have to pay to purchase and maintain your business interruption insurance policy. You may pay monthly or every six months. Business interruption insurance premiums, as well as the additional cost of a rider on your insurance, are tax-deductible business expenses.

Profits and Fixed Costs

Covered expenses under most business interruption insurance policies. Profits refer to your company’s net income, minus business expenses. You will look at the prior month’s business performance to estimate the profits you lost due to an interruption. Fixed costs are the incurred costs of doing business, such as operating expenses and employee wages.

Rider

A rider on an insurance plan is an extra type of benefit a claimant can add to an existing policy. It adds benefits or amends an existing insurance policy, customizing it to fit the client’s needs.

Learn More During a Free Consultation With a Business Interruption Insurance Lawyer

Navigating a business interruption insurance claim during COVID-19 can be difficult. An insurance provider may try everything it can to avoid paying benefits for your lost income and other damages. Before you file a claim, contact a business interruption insurance lawyer in Phoenix for assistance. A lawyer can help you support your claim with evidence, address possible policy exclusions and go up against an insurer in the event of bad faith.