People purchase insurance policies to protect themselves when they encounter unanticipated harm. They spend money out of their own pockets with the hope that they never have to file a claim. Everyone wants to take the appropriate steps to safeguard their health to their home, their car to their pets, and the safety nets that the right insurance policy can provide when things go wrong, can be invaluable in avoiding catastrophe.
Similarly, businesses purchase insurance policies to cushion their fall if things take a turn for the worse. They take on these additional expenses.
BUSINESS INTERRUPTION INSURANCE
Among the insurance products that businesses routinely purchase is commonly referred to as business interruption insurance. According to the New York Department of Financial Services, such policies protect losses incurred by businesses from interruptions or disruptions to their opetations caused by events listed in their policy. The coverage can vary, depending on the terms of the agreement with the insurance provider. These policies may include business income coverage for losses incurred as a result of required interruptions in business operations, but most policies require a damage to property for the policy to be triggered.
BUSINESS INTERRUPTION INSURANCE AND CORONAVIRUS
No one, except maybe Bill Gates, could have foreseen Covid-19, let alone the damage it has wrought on businesses worldwide. When the government orders non-essential businesses to temporarily stop operations, there has certainly been a business interruption.
Many businesses that have had to close and furlough staff are now in desperate need for the proceeds they hope to receive from the insurance policies they’ve been paying for out of their own pockets, for years.
But does their business interruption insurance policy actually cover such damage?
ANALYZING YOUR BUSINESS INTERRUPTION INSURANCE POLICY
When reviewing your policy to determine whether you should be covered by the current orders to keep your non-essential businesses closed, here are some specific terms to look out for:
Are pandemics or epidemics included in the list of triggering events?
Is there a minimum length of time an interruption must last before the insurance coverage kicks in?
Does the policy require that the interruption be a result of damage to property, such as a fire or flood?
This last hurdle may be the hardest to cross. Closures from government orders or employees’ fears of Coronavirus would likely not qualify as a property damage.
CONSULT WITH YOUR INSURANCE BROKER
It’s a scary and uncertain time for business owners everywhere. Unfortunately, the current state of affairs will not require every policy to pay out. It is important to discuss your options with your insurance broker, so you can have all the necessary information before taking your next steps.