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What to do when you need to file a business interruption claim

On Behalf of | Jan 26, 2021 | Litigation & Defense

The expenses you incur running a business continue to pile up even when income drops. If you rent a storefront, you are going to have to pay the same amount of rent in January when sales are slow as you will during December, when Christmas shopping likely drove a ton of traffic into your store.

Even the best budget plan can fall short when the drop in business income is due to unpredictable and uncontrollable circumstances. If your company has recently had to stop operations or scale them down significantly, your revenue may not currently cover all of your costs. Thankfully, this exact situation is why you purchased business interruption insurance.

Unlike other policies that focus on your liability from running a business, business interruption insurance protects you from situations when you can’t keep operating your company but still have costs to cover. Filing a claim often requires documentation and paperwork.

Why does your business need to file a claim?

Showing why your business closed is a crucial part of a claim for business interruption coverage. If there is road work just up the street from the strip mall where you operate that prevents traffic from reaching your business and it will take at least six months to complete, you may need to close until customers can reach your store again. If a nearby business had an environmental catastrophe, you may have to cease operations until they complete their cleanup.

Documenting the scenario that leads to your claim and showing that your business cannot safely and reasonably operate currently will be a big part of your successful business interruption insurance claim.

Make sure you figure out what expenses you need to have covered

Getting the coverage you need will require a careful review of your business’s finances. You need to know what obligations will come due during the time when you will not be able to reopen the business. Rent, employee wages, health insurance cost-sharing and utilities can all cost thousands of dollars.

A comprehensive review of your budget and operating expenses will help you determine what costs you need coverage for and how to optimally distribute the money you receive from a claim. You will also want to review your policy to determine what kind of coverage you have.

Getting help with the application process will reduce your likelihood of making mistakes or omissions that affect the success of your initial claim.