The covid-19 pandemic has people talking about insurance. For those of us in the business, it’s a wonderful thing. We love talking to business people and homeowners about how they can best protect themselves against disaster.
One of the most-discussed topics lately has been business interruption insurance. Today, we all know someone whose business has not earned a dollar in weeks. In fact, maybe every business faces the possibility of shutting down permanently.
Unfortunately, business interruption insurance is not going to cover most business claims for COVID-19. That’s because a policy will only pay out when physical damage causes a business to shut down for a time.
Not only does an illness do its damage without physical damage, a pandemic is almost never listed as a claimable threat in a business interruption policy. And if it is, the policy will be very expensive, especially if it is written after our current experience.
That doesn’t mean you should ignore business interruption insurance. It can save your business if a fire burns down your building, a windstorm blocks customers from reaching you, or any number of catastrophes shut down operations.
Business interruption insurance is different than the regular property coverage you already carry. Say a fire burns down your building. Property insurance will cover the costs of putting up another office – but it won’t cover lost profits or help you pay employees while the firm is closed.
Business interruption insurance does that. It may also pay other expenses, like taxes, loan payments and all those costs that are dependent on having money coming in from customers each month. In addition, it could pay for you to move to a new, temporary office.
So Business Interruption Insurance is very good to have when an unforeseen disaster shuts you down.
Usually, it won’t help at all with a pandemic.
We say usually because there is some conversation that might change the rules. President Trump, for one, has suggested that insurance companies should cover business losses covered by COVID-19, whether policies were written to cover pandemics or not. There has been pushback toward that view, not only by insurance companies but also by legal scholars who point out the U.S. Constitution protects contracts. They also predict years of litigation if the argument gains traction.
However, in addition to government loans that have already been offered, some lawmakers are discussing the possibility of federal support of pandemic coverage for businesses. No legislation has been proposed, but realistically, only the federal government could afford to pay for the kind of losses that widespread pandemic insurance might cover. (By their nature, pandemics affect everyone at once, presenting losses that insurance companies could never afford to cover.)
Whenever you think you might be able to make a claim, it is wise to document your losses – and call your insurance agent. Ask to talk over your existing insurance coverage and go over what it definitely covers and what it probably doesn’t. Keep your notes, in case Congress decides to send you money.
In the meantime, fires and windstorms happen a lot more often than pandemics. Prepare your business if you don’t have Business Interruption Insurance already. Call your agent to talk about how much you need, what it might cost, and the best agency to provide it.
AT GRBM, we would be happy to talk to you about it. Call us at (845) 878-9293.