Let’s say the owner of a trendy fashion boutique in San Diego’s Seaport Village experiences an unforeseen event such as a roof collapsing overnight, causing the rupture of water mains. If this business owner is forced to close his or her store while repairs are made to the property, he or she will have to bear the burden of losing business while waiting to reopen. Nevertheless, this burden could be substantially reduced if a business interruption policy is in effect. The commercial insurance experts at American Tri-Star in National City explain how business interruption insurance works.
Business interruption coverage is a special feature of reliable commercial insurance in National City. It is usually presented as an endorsement to commercial policies and is designed to provide the insured with income during periods when they are forced to suspend business operations.
The main clause of business interruption endorsements typically states that the insurance agency will pay for the business income lost during a suspension of operations due to damage, destruction, or other types of physical loss. It is important to note there must be physical loss involved to trigger the clause.
Business interruption insurance only pays for lost revenue temporarily. The loss of agency equipment and inventory would be ideally covered by other clauses, endorsements, and features of a commercial insurance policy.
In the aforementioned example of a San Diego boutique owner, if the roof collapse incident destroyed the point-of-sale terminal, telephones, and store displays, such losses may be covered by the main commercial insurance policy. The same goes for ruined garments and accessories. If the owner’s business interruption endorsement is in effect, an insurance adjuster would consider the following:
- The damage to the boutique, the equipment, and inventory is of such magnitude that the owner must suspend doing business until the Seaport Village manager completes repairs.
- Customers cannot access the boutique while it is being repaired and renovated. The same goes for employees.
- The net business income of the boutique before taxes are taken out. If the loss occurred during a very slow period, the boutique may have been operating at a loss. It is worth mentioning that normal business expenses and payroll are taken into account when adjusting the insurance payments.
Business interruption coverage is not intended to last a very long time. To this effect, business owners should inquire about the standard period of restoration and any grace periods. If the construction crew in charge of rebuilding the boutique finds a major issue that will take months to repair and exceed the restoration period plus extensions, the business owner may have to consider shutting down the store.
As a special endorsement, business interruption coverage may be subject to various exclusions. Earthquake exclusions can be expected in Southern California. Another possible exclusion would be the utility power lines above a commercial property. More sophisticated coverage may include contingencies such as paying for goods owned by others. In the example of the boutique, such goods could be garments sold on a concession basis.
Make sure you purchase the right commercial insurance from a trusted agency. At American Tri-Star, we aren’t just experts in commercial insurance. We also offer health, homeowners, and cheap National City car insurance. Give one of our friendly agents a call today at 619-474-3900 for a free quote.