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Does Business Interruption Insurance Cover Payroll?

Business interruption insurance is a type of policy that can cover a company’s financial losses after an event or disaster, such as a fire. This insurance can keep a business afloat if it has to shut its doors during reconstruction or renovations. A business can recover damages such as missed revenue, overhead costs, and temporary relocation through this coverage. Business interruption insurance can also cover payroll. Learn about the coverage available in your specific case with help from an attorney in Arizona.

What Qualifies for Business Interruption Insurance?

Business interruption insurance can be imperative for a company if disaster strikes. It can be the only thing standing between a small business and bankruptcy. This type of insurance will only cover a business’s losses in certain situations, however, known in the industry as covered events or perils. The average business interruption insurance policy will pay for damages in the following scenarios:

  • Fire or natural disaster
  • A business that has to temporarily close down
  • Reduced hours of operation
  • A government mandate forcing a business to temporarily close its doors
  • Physical damage to a nearby business, in some cases

For the most part, business interruption insurance in Arizona does not cover viruses and pandemics, such as COVID-19. Insurance providers specifically inserted clauses called virus exclusions in their interruption insurance policies decades ago, when other viruses forced businesses to close down. Insurance companies are now citing these exclusions as a reason to deny claims. If your provider is wrongfully denying your claim, however, a business interruption attorney can help.

Does Business Interruption Insurance Cover Payroll?

Yes, business interruption insurance can cover payroll. This type of coverage may be available if a business has to shut down or limit its number of employees temporarily due to a covered event but does not want to lose its employees during the shutdown. In this scenario, the employer could use business interruption insurance to continue paying employees even without the business bringing in money.

Using business interruption insurance to supplement payroll can save a company the costs of training and hiring new employees upon reopening. These costs can be significant. It can allow a business to keep its existing staff, including members of the company that have been on the payroll for many years. To receive this type of coverage, however, the claimant will have to prove that the reason for the income loss is a covered event.

Business interruption insurance can reimburse the money a company likely would have made had the covered event or peril not happened. It can help a business pay for taxes, business loans, operating expenses, fixed costs, training and hiring costs, extra expenses, overhead costs, supplies, employee payroll, and even profits. If necessary, it can pay to move a business to a temporary location while the original location is under construction as well. Business interruption insurance can maintain a business’s previous rate of income while it recovers from a disaster.

How Long Does the Coverage Apply?

Business interruption insurance coverage for payroll will only last a certain period of time. Generally, the insurance company determines the coverage period when the business owner first purchases the policy. Coverage periods vary from policy to policy. Some cover payroll for a few months, while others will cover payroll for years. Better coverage usually requires higher premiums.

Get Help From a Phoenix Business Interruption Attorney

Business interruption insurance is a complicated type of coverage. Insurance companies often do not make it easy for claimants to file claims and receive benefits. The best way to protect your rights and your business during a business interruption insurance claim in Phoenix is with help from an attorney. An attorney can explain related laws, take over communication with your insurance company, and argue for fair compensation for payroll and other losses on your behalf. Discuss your claim with a Phoenix business interruption attorney from Surrano Law Offices for more information today.