When disaster strikes, it can take a company weeks or even months to recover. During that time, the company may face a loss of income and additional expenses. Occasionally, these can wreck the company financially.
Because of this, many companies choose to carry business interruption insurance. But how much does business interruption insurance cover? We'll explore what it covers and doesn't cover and the extent of this coverage.
What Is Business Interruption Insurance?
To fully examine the question of “How much does business interruption insurance cover?” it is important to understand what exactly business interruption insurance is.
Business interruption insurance financially protects a business during periods when it is unexpectedly unable to operate. These are occasions when a natural disaster or other event halts a business's ability to function normally.
For example, a fire may temporarily shut down a business. Navigating the aftermath of a fire will often involve using business interruption insurance. The insurance could help cover lost earnings while repairs take place.
What Does Business Interruption Insurance Cover?
The coverage extent of business interruption insurance only extends to specific items. A business interruption insurance payout will only cover losses in these categories:
- Profits
- Operating expenses
- Rent, mortgage, and lease payments
- Costs associated with moving to a temporary location
- Loan payments
- Wages
- Taxes
- Reasonable other expenses
- Training costs for using new equipment or machinery
Limitations of Business Interruption Insurance
There are misconceptions about business interruption insurance that confuse many people. Specifically, some people believe it covers circumstances that it actually does not.
Business interruption insurance does not cover the following:
- Items broken or lost during an event
- Damage caused by the event
- Utility payments
- Losses caused by viruses, diseases, or pandemics
- Income and expenses that you have not properly documented
In many of these cases, another form of insurance provides this coverage. For example, hurricane insurance covers damage from hurricanes.
How Much Does Business Interruption Insurance Cover?
Compensation from business interruption insurance depends on the exact insurance plan. Many will cover all of the categories discussed above. However, they will only cover them to a certain degree.
One part of the answer to "How much does business interruption insurance cover?" depends on policy limits. Business interruption insurance coverage limits exist for all policies.
Typically, this is a monetary limit that aligns with a business's regular operation. The coverage would not include expenses that go past this limit.
There is also typically a limit on the period of time business interruption insurance covers. For example, a 12-month plan will cover costs for 12 months but no longer than this.
The cost of the insurance premiums usually ties into these limits. The amount covered by business interruption insurance plans that are cheaper is usually less than that of more expensive plans.
Choosing the Right Business Interruption Insurance
With business interruption insurance limitations presenting a real problem, it is vital to choose the right policy. Doing so can help make the recovery process easier.
Picking the right plan starts with understanding a business’s needs. Looking at current earnings and projected future earnings will give a better picture of the coverage level your business needs.
Experienced Texas attorneys can also help. The team at McLaurin Law, PLLC, is well-versed in insurance details and can help you navigate the choice.
Understand Business Interruption Insurance in Texas
How much does business interruption insurance cover? In many cases, it will cover lost profits and expenses that a business incurs simultaneously under certain circumstances. However, the extent to which these plans do this will depend on the exact plan.
To make sure you're properly utilizing business interruption insurance in Houston, TX, choose your plan carefully. Call McLaurin Law, PLLC at (713) 231-5903 or contact us online to schedule your consultation.
