Posted on January 3, 2025
ICHQ | Site Author
A natural disaster can cause serious damage to your business. Unfortunately, in some cases, that damage may force you to reduce or even temporarily suspend your operations. That means less money coming in during any already challenging time—and your weekly and monthly overhead costs can keep adding up. Business interruption insurance coverage can help to fill the gap.
After a natural disaster, a business interruption policy can provide coverage for your fixed costs related to operating a location that is adversely impacted. Here, our New Orleans business interruption lawyers provide an overview of what is and is not covered related to natural disasters.
What is Business Interruption Insurance?
As defined by the National Association of Insurance Commissioners (NAIC), business interruption coverage “allows businesses to pay fixed expenses, including costs incurred while operating at an offsite location, while the property is closed for repairs.” Put another way, business interruption insurance is a type of coverage that compensates businesses for income lost during periods when they cannot operate normally due to an external event. The insurance is designed to help a business cover expenses and lost income resulting from unforeseen disruptions—such as those caused by certain natural disasters, fires, or other significant events.
What is Typically Covered
Fixed Operating Expenses (Overhead)
Operating expenses covered by business interruption insurance are the ongoing costs that a business must continue to pay even when operations are temporarily halted due to a covered event.
These expenses can include rent or mortgage payments, utility costs, and other fixed overhead costs. In other words, they are the costs do not cease just because the business is not generating revenue or has a big disruption in revenue. The coverage ensures that a business can maintain its financial obligations and preserve its infrastructure during downtime.
Lost Income
Lost income coverage under business interruption insurance compensates for the revenue a business would have earned had it been operating normally. The calculation is typically based on the business’s past financial records and projected earnings during the interruption period. The insurance aims to provide a financial safety net that allows the business to sustain itself financially.
The extent to which lost income/lost profits will be covered varies by business interruption policy.
Additional Costs
In some cases, temporarily, additional costs incurred by the affected company will also be covered.
Additional costs in business interruption insurance refer to the extra expenses a business incurs to continue operations while its primary location is being repaired or is otherwise unusable. These costs can include temporary relocation to another facility, renting equipment, hiring additional staff, or other necessary expenditures to keep the business running.
What is Not Typically Covered
Ordinary Operating Expenses
While fixed operating expenses are often covered under business interruption insurance, ordinary expenses that vary with business activity—such as raw material costs, inventory, and many direct labor costs— are typically not covered. These expenses decrease when business operations cease, so they are not considered continuing costs that need support during a shutdown period. Only those fixed costs that the business must pay regardless of its operational status are usually reimbursable.
Undocumented Income
Business interruption insurance does not cover income that is not documented in the business’s financial records. For instance, cash transactions that are not recorded or projected earnings without historical data to back them up generally will not be considered in the calculation of lost income. The insurance relies on official financial statements and past tax returns to determine the appropriate compensation for lost revenue.
Broken Contracts and Lost Opportunities
Business interruption insurance typically does not cover losses associated with broken contracts or missed business opportunities that arise as a result of the interruption. For example, if a company loses a major client or contract because it cannot fulfill orders or services during the downtime, these losses are generally not covered under standard policies.
The Specific Terms of a Business Interruption Insurance Policy Always Matter
What is or what is not covered by your business interruption policy will always depend on the specific circumstances of your case, including the policy language within your business interruption policy. Each policy can vary significantly, with different exclusions, coverage limits, and deductible requirements that directly affect claim outcomes. It is essential for businesses to thoroughly review and understand their policy’s terms to ensure it aligns with their needs.
Know the Best Practices for Filing a Business Interruption Claim After a Natural Disaster
Was your business adversely affected by a natural disaster? Are you prevented from resuming normal operations due to damage to your premises or another related issue? You may have a business interruption claim. It is important to take a proactive approach. Here is an overview of the best practices for filing for business interruption benefits:
- Make Sure You Understand Your Coverage: You should take the time to read over your business interruption policy and make sure that you understand the filing requirements. Knowing what your policy covers, the limits of coverage, and the deductibles is essential for an efficient claims process. Make sure you know the procedures for filing a claim—including any deadlines and requirements for documentation.
- Thoroughly Document Everything (Costs/Loss of Income): To successfully file a business interruption claim, detailed documentation of all financial impacts is essential. Among other things, this includes keeping precise records of daily operations. Both pre and post-disaster records are required. Business owners and operators should document every expense incurred during the interruption, such as temporary relocations, additional labor costs, and any other operational expenses. Similarly, maintain detailed records of lost income, supported by historical financial data and other relevant business documents.
- Take Immediate Action if Claim is Denied: Unfortunately, even when they have a strong case, some business owners do have trouble getting access to their benefits. If your business interruption claim is denied, you have the right to appeal. You should review the insurer’s reasons for denial. Check your policy to see if the decision was made according to the terms outlined. A top-tier business interruption insurance claims lawyer can help with an appeal.
Why Trust Insurance Claim HQ for a Business Interruption Claim
Business interruption claims are complicated. Sadly, too many companies struggle to get access to all of the benefits that are due to them from the insurance company. At Insurance Claim HQ, we are focused on doing everything required to maximize your benefits. Our case results tell the story of what we can do for business owners in New Orleans and throughout the Gulf Coast region. We are proactive and we are driven to obtain results. Our team offers free, comprehensive, and no-obligation initial consultations in business interruption claims. Along with other things, our New Orleans business interruption insurance lawyers are ready to:
- Conduct a comprehensive review and evaluation of your case
- Help you gather and prepare all supporting documentation
- Handle the business interruption claims paperwork
- Take aggressive action to help you maximize your financial benefits
Schedule Your Free Consultation With Our New Orleans Business Interruption Lawyer Today
At Insurance Claim HQ, our New Orleans business interruption insurance attorney is standing by, ready to protect your rights and your interests. If you have any questions about business interruption claims, please do not hesitate to contact us today.
