What do professionals need to know about a business interruption insurance claim?
What do professionals need to know about a business interruption insurance claim?
Each practice is unique — and professionals face additional challenges during a business interruption claim. Following these best practices can help ensure you receive fair compensation:
- Providing proper documentation of your financial income
- Gathering evidence of your financial losses
- Proactively assessing your insurance policies and coverage
- Considering extra expense coverage
- Seeking the support of a third-party advisor
These steps can help ensure you quantify your losses accurately and receive the compensation your practice needs to resume its operations.
Professionals are always busy meeting the unique needs of their clients — and it may be difficult to find enough time to sit down and review your insurance policies and coverage. However, having the right protection in place is essential to help your practice recover in the event of a business interruption such as a fire or a cyber attack.
In our previous article, we examined what business owners can expect during a business interruption insurance claim. However, there are additional considerations that professionals need to keep in mind during the complex claim process. Let’s review how a business interruption impacts professionals, and the steps you can take to ensure you have the right coverage to protect your practice in the event of an interruption.
How does a business interruption impact professionals?
An interruption event can impact any business owner — and every business is at risk. Business interruption insurance covers loss of income while your business cannot operate due to an insured event. This provides the financial stability you need to resume operations after a disruption occurs.
It quantifies the losses and additional expenses you incurred while your business was not able to operate as a claim to your insurance company. Your insurance provider will review your claim and policy coverage to determine the amount of compensation you will receive.
However, professionals have several additional considerations that set them apart from other business owners. These are the unique factors that professionals must consider when a business interruption event impacts their practice:
Proof of income
Professionals provide important services instead of physical products — which can make it difficult to quantify your losses to your insurance company during a business interruption claim. It is necessary to provide proof of income such as financial records and anecdotal evidence to support your claim. This will ensure your financial losses are quantified accurately and ensure you receive appropriate compensation.
Deferred Revenue
Many insurance providers may assume that you can reschedule services that were impacted by a business interruption event — and that your income is deferred instead of lost. However, if your practice is busy, this deferred work may have prevented other work from occurring. Therefore, you may still experience a loss of income during the downtime that cannot be recovered.
Types of business interruption events
Professionals are at equal risk of unexpected events such as floods or cyber attacks on their practice. However, professionals are often uniquely at risk of interruption events caused by civil authority orders. For example, during the 2013 flood in Calgary, many professionals did not experience physical damage to their practice. However, they still experienced financial losses because they could not access the area where their practice was located due to civil authority orders.
How can I protect my practice from a business interruption?
It is important to take the right steps to ensure your practice receives appropriate compensation from a business interruption event. These best practices can help protect your practice and ensure you are adequately compensated for your losses in the event of a business interruption:
Proper documentation
You need to provide proof of income to receive appropriate compensation for a business interruption — and meticulous documentation can help support your claim to your insurance company. Ensure that you maintain accurate and up-to-date financial records to help quantify your loss of income to your insurance provider.
Gather evidence
Proper documentation is the first step toward receiving appropriate compensation for a business interruption event. However, you may also provide anecdotal evidence such as calls from clients who could not access your services due to a disruption.
Additionally, many insurance providers may assume that you can reschedule services that were impacted by a business interruption event — and that your income is deferred instead of lost. However, clients may choose to move to a different service provider during the interruption, and providing evidence of clients you lost during a service disruption may help support your claim.
Proactively assess your insurance policies
Professionals renew their insurance coverage annually — and it is essential to proactively review your policies and coverage to ensure they meet your specific needs. During the renewal process, assess your policy wordings and coverage limits to determine if they will fully protect your practice in the event of a business interruption.
An advisor can help review your policies to identify any gaps and ensure you have the right coverage amounts in place to protect your practice before a business interruption event occurs.
Consider extra expense coverage
While extra expense coverage is distinct from business interruption coverage, it can still help protect your practice during an unexpected event. You may be able to keep your practice running throughout a disruption by setting up remote workstations or renting a temporary office space — and extra expense coverage can help you recover those costs.
Review the limits and inclusions of the extra expense coverage your practice has in place. If you your policy does not include extra expense coverage, consider adding it to your insurance policies to help ensure your practice keeps running during an interruption.
Seek outside support
The insurance claim process can be stressful and difficult to navigate — and a third-party advisor can help quantify your losses accurately to your insurance company. An advisor can provide guidance throughout the complex claim process and gather evidence to prove your loss of income. They can also communicate with your insurance company to ensure that you receive adequate compensation for your losses and give you more time to focus on getting your practice up and running.
Insurance Advisory
Take the next steps
Each practice is unique — and professionals face specific challenges during a business interruption claim. However, maintaining comprehensive documentation, ensuring that you proactively assess your insurance policies, and seeking the support of an advisor can help quantify your losses accurately and ensure you receive adequate compensation.
For more information, contact a member of MNP’s Insurance Advisory team. Our advisors can work with you to ensure you have the appropriate level of coverage to protect your business. We can also provide professional support after your business experiences an interruption event to help quantify your losses and ensure you receive fair compensation.
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