Business income insurance, also called interruption insurance, is a type of insurance carried by a business that helps owners recoup losses when forced to suspend operations for a time that in turn prevents a company from earning income.

It can be added to an existing business owners policy or purchased as a separate policy that works alongside regular business property insurance, providing owners critical funds to keep up with financial responsibilities when there is an interruption to work because of a covered peril.

The COVID-19 pandemic has generated many questions on how business insurance agencies must handle business income insurance claims, as many small companies across the country have been forced to remain closed.

Now, with the added complication of the civil unrest we’ve seen in the last month, those questions have multiplied and unfortunately, the answers are just as complicated as the questions.

Typically, civil unrest is a named peril that business income insurance policies cover.

When a business is affected by looting and rioting as has recently happened to many small businesses, the standard business owners insurance policy covers physical damage and theft.

If a company owner has a business income policy, it may provide additional benefits until the business can start generating income again.

As long as the business sustains some sort of physical damage to its location, insurance providers will normally accept claims for interruption benefits under the trigger of civil unrest.

The Issue of COVID-19 and Business Interruption Claims

Even though the many government orders for business closures due to COVID-19 happened before the current civil unrest issue began, the while issue of business interruption has become highly complicated as to whether or not a business is entitled to file an income interruption claim.

The biggest unknown that insurance agencies are trying to answer is how to value lost income so that benefits can be paid to establishments now dealing with closures due to civil unrest.

Payable benefits from business income policies are calculated based on the most recent past income records.

Businesses that have already been closed for weeks or months or had to cut hours and minimize their services due to COVID-19 were already not earning a typical income when this all began.

This period of no or reduced income could affect how income amounts are calculated for valuing the business insurance benefit to be paid.

Paycheck Protection Program loans and other emergency funding received during the COVID shutdowns may also affect these calculations.

It’s a situation that the business insurance industry has never dealt with before.

What Does It Mean for Business Owners?

The double-whammy of COVID-19 shutdowns and now lost income due to civil unrest is a complicated situation for business owners and business insurance agencies alike.

This is especially true for small businesses already trying to survive given the fact that most business owners insurance does not cover lost income due to a pandemic and there are really not any pandemic policies available for that in Texas.

How much business interruption benefit a qualified business will receive is still up in the air while the industry as a whole tries to come up with a fair way to handle the situation.

Answering Questions About Business Income Benefits

If you are an owner of a business affected by civil unrest on the tail end of shutdowns due to COVID-19, business insurance agencies understand that these are incredibly trying times for you.

Fortunately, industry leaders are thus far encouraging providers to lean toward providing more rather than less assistance to owners regardless of prior COVID-19 shutdowns.

The wisest choice is to contact your agent as soon as possible if your business location is damaged due to recent or ongoing events and discuss your business insurance property policy and the benefits you are entitled to based on the severity of the situation.

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