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Understanding Restaurant Coverage: Business Interruption.

Posted 11/6/2019

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Understanding Restaurant Coverage: Business Interruption

If your restaurant suffers property damage as a result of a fire or storm, Commercial Property insurance will cover the damage to your operation. However, Business Interruption (BI) insurance is needed to step in to help cover your loss of revenue while repairs or rebuilding takes place. BI coverage will also help you meet your financial obligations including paying bills and other additional expenses, even while you are not operating.

BI insurance can be designed to cover the following, up to a certain amount:

  • Lost income: This includes the estimated profits you would have made if your business hadn’t experienced a disaster.
  • Payroll costs: This helps ensure your employees get their paychecks even if disaster hits your business.
  • Fixed expenses: This includes your lease or mortgage payments and utilities.
  • Taxes. Let’s say your small business suffers damages that force you to temporarily close right before your tax payments are due. BI can help cover the costs.
  • Mortgages or rent: After a fire destroys parts of your restaurant, it needs to be rebuilt and will take weeks to do so. BI insurance can help cover your mortgage payment or lease.
  • Relocation costs: If you need to temporarily move your operation while the original location is being repaired, BI coverage will help with the extra expenses involved.

In addition to having Business Interruption coverage in the event of property damage, one of the most devastating threats you can face as a restaurateur is the loss of power and utilities. Unlike other businesses, you face a critical time-sensitive deadline, as a prolonged power outage can mean the shutdown of the business and loss of income and food spoilage.

It’s important, therefore, that your Business Interruption insurance includes coverage in the event of an off-premises utility service interruption such as damage to overhead transmission lines. Some policies impose limitations on this coverage or exclude it altogether.Our program includes BI with $250,000 of coverage for damage to overhead transmission lines.

Claims Example

During a heavy storm, lightning struck a nearby transformer causing a family-style restaurant to have no power for three days. The restaurant lost $25,000 in business income and another $10,000 in food inventory. BI insurance covered these expenses. 

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