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Riots across the U.S. and the subsequent damage to thousands of businesses have many business owners asking what their business insurance policies will cover. In this article, we’ll answer some frequently asked questions about business insurance and what it covers.
Are businesses covered for property damage from riots?
Yes, they are. Business property that has been damaged by riot, civil commotion. vandalism and fire are covered under virtually all business owners and commercial insurance property policies. This typically includes damage to windows, doors, light fixtures, store windows and plate glass on office fronts. There is also coverage for the contents of the building such as furniture, office supplies, computers or machinery that may be either damaged or stolen.
Should a business insure its building and contents at replacement value or actual cash value?
A business may have the option to insure its business property at replacement value or actual cash value. The difference is that replacement value coverage can help a business replace its property at market prices, whereas actual cash value coverage takes depreciation into account. Replacement value coverage costs more, but it also pays out more in the event of a claim.
What about loss of income?
Businesses that are forced to suspend operations or limit hours due to rioting, vandalism or civil commotion and have coverage for the loss of income under business income insurance (also known as business interruption, or BI) do have coverage. Coverage is typically triggered if there is direct physical damage to the premises.
What if a business is unable to access its property due to a government order? If there is a curfew in place, how will that impact a business?
While insurance policies vary, typically there is business interruption coverage for civil authority orders, such as curfews (when a business has reduced hours) or when a business is unable to access its property due to a government order requiring the business to close. Such coverage nearly always requires the existence of property damage within some limited geographic radius surrounding the policyholder’s location. This often ranges from 1 to 10 miles. Typically civil authority coverage has a waiting period of 24 to 72 hours, depending on the policy, before a policyholder can begin claiming the benefits of coverage. Coverage typically lasts up to four weeks, but the time period can be extended by paying an additional premium. However, once a curfew is lifted and business can resume, coverage ceases.
Is business income coverage subject to a deductible?
Under most policies, business income coverage is subject to either a waiting period, which acts like a form of deductible or a monetary deductible.
How will the amount of the business income loss be determined for a business?
Under most policies, business income coverage includes both net income (the profit a business earns after expenses and allowable deductions) and the cost of continuing normal operations.
What information does a business need to support its business income claim?
Most insurers require the following:
- Profit and Loss statements
- Sales records
- Income tax returns
- Rent or mortgage statements
- Payroll records
What if a business vehicle has been damaged in a riot?
Damage to vehicles is covered under the optional comprehensive portion of an auto policy. This provides reimbursement for damage to the vehicle and its contents caused by fire, falling objects, vandalism or riot. Comprehensive coverage also reimburses a business if the vehicle’s windshield is cracked or shattered. Some companies offer glass coverage without a deductible.
Any advice for business owners?
Know your risks! Every smart business owner recognizes that business insurance is an essential element of an overall business plan. It should be factored in with fixed operational expenses like utilities. Without adequate coverage, business owners may have to pay out-of-pocket for costly damages from a riot, hurricane or other disaster, which could spell financial ruin.