How to Make Sure Your Insurance Covers a Commercial Fire

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How to Make Sure Your Insurance Covers a Commercial Fire
(Photo : How to Make Sure Your Insurance Covers a Commercial Fire)

Physical damage to a commercial space can shut your business down and cripple your ability to operate. Even a temporary shutdown means limited or no cashflow, leaving you unable to pay overhead expenses, debts, or salaries. That's why you have business insurance! But there are still concerns about how much money the insurer will pay out, when you'll get it, and whether or not it will be enough to reopen.

Below are some of the concerns that you might encounter when you're making a claim to recover from commercial damage after a fire, flood, or any other type of loss.

Repairing the Premises

Your policy should cover the costs of repairing, or if necessary, rebuilding the premises. One of the most common issues owners experience when it comes to the Structure part of their claim is that their vision for the repairs don't align with what the insurance company suggests. Other issues that can arise include:

  • The insurance company insisting on using one of its own preferred contractors;

  • Delays hindering the repair process; or

  • The insurer wanting to repair the premises rather than rebuild.

Business Interruption Insurance

One of the most important aspects of your policy is Business Interruption Insurance, which covers the loss of business income when you're unable to operate. A common definition of business income is net income and continuing operating expenses (such as payroll).  This coverage can be essential for a business' survival, as failing to keep up with ongoing expenses will quickly ensure they will not be able to reopen.

When you're making a claim, you will need to be able to prove your business income by providing accounting details. Planning and timing payments from the insurance company is essential so that you can keep up with your obligations as they come due without falling into arrears and threating relationships.

What Counts as Interruption?

Most business interruption insurance policies only apply to interruption caused by physical damage to the property. For example, businesses shutdown by government order might not be covered by a policy, though it's an area that's still evolving.

There are a number of policy add-ons businesses can access to make sure they are covered in a greater number of circumstances, such as:

  • Contingent Business Interruption: Damage or destruction to property owned by suppliers or receivers that, in-turn, interrupts your operations due to delayed or cancelled deliveries;

  • Service Interruption: Loss of utilities or service such as gas, water, electricity, phone, etc. prevent you from opening; or 

  • Leader Property Disruption: If your business depends on a leader property like a kiosk inside a casino or amusement park that is damaged, your insurance can compensate you for lost business income while the leader property is repaired.

Contents, Equipment, and Inventory

Finally, there's lost inventory, contents, and equipment coverage. Your policy should cover most of the costs for replacing damaged contents and equipment. However, they may treat equipment and inventory differently in terms of payment details or in how depreciation is applied. That can lead to disagreements over what's considered inventory vs. contents and equipment.

Other concerns that may crop up include under-valuation or over-depreciation on the part of the insurer.

Anytime an insurer rejects a claim, you can still argue for why the loss should be covered. Talk to an insurance lawyer if you have further questions about your commercial insurance policy and fire damage repair.

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