Business Interruption (BI) claims can be complicated and are often misunderstood. In general, the purpose of Business Interruption coverage is to put the business in the same financial position it would have been in “but for” the event of a loss. Simply put, this coverage will help to replace the cash flow that would have been generated in order to cover the operating expenses of the business and paying out the net profit if the business is profitable.
It is a common misconception that Business Interruption insurance covers a business’ lost revenues. This is rarely the case. The expenses of the business need to also be considered. Variable (non-continuing) expenses such as costs of goods sold and utilities are not going to be reimbursed by insurance due to the fact that these expenses are not incurred during a loss. Fixed (continuing) expenses such as rent and insurance will be reimbursed by insurance. Learn more by downloading the document below.