Business Interruption Frequently Asked Questions

Questions about what to expect when you experience an interruption of business and wondering what your policy covers? You’re in the right place. We have answers for you.

What is business income?
What is extra expense?
What is the period of restoration?
What is co-insurance?
What is net income?
What are non-continuing expenses?
What is a waiting period?
What is business income loss from dependent properties?
What service does a forensic accountant provide?
What can I expect to happen?
What will I need to provide the claims examiner to help resolve my claim?
What else can I do to help resolve my claim?

What is business income?

Business income is the reduction of the insured’s net income, plus continuing normal operating expenses. It may be business income other than rental value, or limited to rental value only.

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What is extra expense?

These are necessary extra expenses during the period of restoration that a business would not have incurred had there been no loss or damage to covered property. Coverage includes expenses incurred to:

• Avoid or minimize the suspension of business and to continue operations, OR
• Minimize suspension of business if operations cannot continue, OR
• Minimize suspension of business if operations cannot continue, OR

The latter is covered only to the extent that it reduces the amount of loss that would otherwise be payable.

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What is the period of restoration?

This is the length of time immediately after the time of loss, or after a stated waiting period. It ends when the property should be repaired, rebuilt, or replaced, or the date business is resumed at a new permanent location. See also “What is a waiting period?”

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What is co-insurance?

It is a provision in some insurance policies that requires the insured to carry an amount of insurance equal to or greater than a specified percentage of the total insured value of the property or exposure at risk.

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What is net income?

This is the net profit or loss that would have been earned or incurred.

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What are non-continuing expenses?

These are normal expenses that do not continue during the period of restoration. Expenses that do not continue may reduce the loss the insured would otherwise incur.

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What is a waiting period?

Some policies contain a provision that states that the period of restoration starts after 72 hours post-loss. The initial 72 hours without business interruption coverage is the waiting period.

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What is business income loss from dependent properties?

This is the business income loss from suspension of the insured’s operations because of loss or damage to the property of organizations the insured is dependent on, but doesn’t own or operate.

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What service does a forensic accountant provide?

A forensic accountant combines accounting and auditing with investigative expertise to produce a calculation of business income loss.

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What can I expect to happen?

Every claim is different, and various policy provisions, state statutes, and regulations apply, which may result in different requirements and results. However, in resolving a business income loss claim, the claims professional will often take the following steps:

• Determine coverage and damages. You can expect the claim examiner to meet with you in person or over the phone in the first days after the loss to explain the claims process, and help you understand what is needed to resolve your claim.
• Gather documentation. The claim examiner will explain the information needed to resolve the business income portion of your claim.
• Determine the amount of business income loss. You can expect our examiner to work with you, along with your accountant or representative, and possibly an independent forensic accountant, to determine the business income loss.

The amount of time it takes to complete these steps depends on the complexity of the loss, the availability of documentation, and other factors.

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What will I need to provide the claims examiner to help resolve my claim?

• Appropriate records including:
  • profit and loss statements
  • income statements
  • tax records and historical sales records for the two prior accounting years (if available)
• Record of extra expenses incurred to resume business operations
• Copy of lease or leases, covenants and by-laws, if applicable
• Record of non-continuing expenses
• Other business records needed to substantiate the loss

What else can I do to help resolve my claim?

• When possible, make sure your accountant is available
• Maintain an accurate record of sales and operations expenses that continue after a loss
• Maintain accurate records of extra expenses
• Communicate with clients/customers describing when and how operations will resume
• Consider and implement reasonable action to avert or mitigate loss. This may include but isn’t limited to:
  • Continuing partial operations to the extent feasible
  • Rental of a temporary facility
  • The expedition of repairs or replacement of stock and equipment to resume business
  • Outsourcing of some operations to other organizations.

Note: This is general information. Policy provisions will vary by policy and state. This information does not change or supersede your policy provisions. Local statute or regulations may affect coverage.

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