If you own a business and have insurance, your policy will typically cover the cost of cleaning up from damage and replacing damaged and stolen merchandise. Riot and civil commotion are basic perils under your commercial property policy and also under business interruption. So, in certain insurance policies that are standardized today, those two perils are built in automatically.
Business insurance is similar to car insurance: Basic liability is required by many landlords (though not all) in a lease agreement, protecting proprietors in the event that they face lawsuits from customers who are injured in their stores, among other legal claims. But it may be up to the individual business owners to decide how much insurance they want to buy to cover their inventory and equipment in case of theft, fire and other scenarios.
For smaller businesses, the amount of coverage can vary widely in terms of deductibles, depending on the type of business and the value of the inventory. The amount of coverage depends on the owner. Since not all landlords require businesses to insure their inventory and equipment against loss, some local owners will end up having to cover all of the losses and repair costs on their own. However, for businesses that purchase property coverage, it usually includes losses from civil disturbances.
Insurers note that each claim is different and will be evaluated on its unique set of facts and the terms of their policy.
What Is Business Interruption Insurance?
When a disaster strikes your business location, it may be temporarily unusable. Your business will not be producing income and will likely continue to incur fixed costs (rent, utilities, etc.). Standard property insurance does not cover the loss of income caused by the temporary closure of the business. Business interruption insurance can be included in the property insurance coverage to cover this loss.
Business interruption coverage covers:
- The income your business would have made during the period your business location is unusable. This amount is determined by your historic financial records.
- The costs and expenses incurred by your business even though the location is unusable. Again, these fixed costs are determined by analysis of historical financial records.
- Costs incurred in having to move and operate from a temporary location.
- “Extra expenses” that may be incurred by keeping the location open. Extra expense coverage is offered by insurers to lower business interruption costs. For example, if your business can stay open by renting a piece of equipment, then the extra expense of the rental would be covered because the insurer would rather pay the extra expense of the rental than the cost of a shut down.
In short, business interruption insurance serves as a financial bridge until the company can get back on its feet.
Even if your business has not seen damage from recent events, this is a good time for all business owners, especially small businesses, to review their policies.
Check your deductibles and understand exactly what kind of coverage you have.
If your business is damaged, it helps to take photos and video and document the destruction and keep detailed records of everything.
Be sure to read your policy documents so you know which perils your insurer helps cover.