How to Recover Business Interruption Losses

When people think of commercial property insurance policies (assuming that they ever think of them at all), they typically think of coverage for damage to buildings and their contents. For example, if a factory burns down, the property insurance policy will pay the amount needed to replace the damaged property—or at least the value of the property that was destroyed.

But most commercial property insurance policies provide additional coverage that not only insures the cost to repair or replace what has been physically damaged but also compensates the policyholder for profits lost during the period of time needed to recover from the physical damage. Thus, for example, if it takes a year to rebuild the damaged factory, and the policyholder suffers $3,000,000 in lost sales, after considering saved expenses during the rebuilding process, most property insurance policies will cover these “business interruption” (BI) losses.