Mastering Claims: How to Prepare a Business Interruption Claim in 2024

What is business insurance policy?

By answering this question, I will give you insights on several other questions that you might have regarding a Commercial/Business policy.

In layman’s terms the business policy is like a pizza.  You always start out with the basic crust (policy) and add the ingredients (endorsements) that you want.  This is where a great agent comes in!  I have seen business policies with over 20 endorsements. 

Please remember you always get what you pay for when it comes to a business policy, no matter the insurance carrier. A good agent should know your business and its coverage needs!

Loss of income

OK, back to answering the question of loss of income.  I will bullet point several questions you will need to ask your agent in order to make sure you have the correct coverage.  There are several caveats when it comes to loss of income:

• When purchasing your policy, specifically ask for the Loss of Income Endorsement. It doesn’t automatically add to your policy with most carriers.
• Next question is what has to happen in order for you to claim loss of income. Your agent should answer this question, but normally there has to be accidental sudden physical loss (ADPL).
  • Some examples are, a vehicle drives through the front of your building, or a wind sheer, or tornado, tears off the roof of your business.
• Please note, most business policies have a time frame that your business has to be out of operation in order to trigger a Loss of Income Endorsement.
  • Normally, this is calculated by hours, so make sure you note the time when your business became inoperable and how many hours your were unable to do regular business. Make sure your agent gives you that time frame when you add the Loss of Income Endorsement.

• OK, the ease of getting a claim settled depends on how much preparation you have done before any event, or (ADPL). So, on short term loss of income claims make sure you have at least four months of daily sales records.
• Normally, if you use a point-of-sale business software that will be easy to obtain, but if you’re a small operation be sure to keep a ledger on your total (gross) daily sales.
• On large losses, such as a fire, hurricane etc., your repairs could take up to a year or over. The carrier could enlist a forensic accountant to determine your loss of income. Just know the insurance company has a list of the normal profit markup percentage nationwide. If yours is more than a normal markup, you need to be able to show it in your records.
• I always get the question about paying your employees while your business is non-operational. The answer to this is your policy is an indemnity policy, (put you back the way you were prior to the event), this means, the amount you will get paid will be the amount you would gross for the end of the day, month etc.
• So, the employee payment would be included in the gross amount paid to you. Note; if your employees work out of normal operational hours to assist in the cleanup, then the insurance company would also owe you for the time you paid your employees for any cleanup you hired them to do outside their regular job routine.
• One of the last points I would like to make is how and when do you get reimbursed for the loss of income in order to maintain your lifestyle, along with keeping your employees.
• This answer can vary on the size of loss you may have experienced, but no matter the size of loss, you should immediately get a good contractor involved that is willing to give you a time table of the repairs and a approximate completion date. This will help expedite the claim and the claim process.
• If you need money immediately, request an advance payment that will be credited later on your loss of income payment. Again, a good agent can assist and work with the claims department on your behalf.

In conclusion remember that as it pertains to loss of income, be sure to ask you agent for specifics about down time, time frames, ADPL and confirm what can trigger a loss of income claim. Take a list of questions to ask you agent, and if he can’t answer those questions, I might find another agent.

Remember after the loss, if you have good records you’re golden.  By the way, this is just the very tip of the iceberg when it comes to a business policy, but it is one aspect you, as a consumer, will need to know.