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Timing is Key: Understanding When Business Interruption Insurance Coverage Begins

By Darragh Timlin on April 23rd, 2024

Once a disaster strikes, business interruption insurance can help replace lost revenue while businesses continue to operate. However, the exact timing of when coverage begins  after incidents requires awareness to maximise claim effectiveness. 

Brisco Business examines the key considerations surrounding waiting periods, coverage activation, and loss timelines to help businesses understand when their business interruption insurance will provide financial assistance. 

The Waiting Period Before Coverage Kicks In

Unlike first party property damage coverage that immediately addresses physical damage or rebuild costs, business interruption policies have built-in waiting periods between disaster dates and payouts beginning. This buffer, known as the ‘retention’ or ‘deductible period’ serves multiple functions:

  • It avoids claims arising from very brief utility disruptions or negligible incidents a business overcomes independently using continuity planning. As a result, insurers avoid frequent minor claims.
  • The waiting time frame allows initial assessment of the damage and business impacts to estimate projected recovery outlooks and financial loss trajectories.
  • It incentivises policyholders to take prompt action if delays risk exceeding the retention period. Insurers favour proactive recovery initiatives rather than dependence on payouts.

Typical retention periods before business interruption coverage comes into effect range from 24 hours for small businesses to a week or longer for major corporations based on risk appetite. Defining suitable waiting periods requires weighing emergency business savings against cash flow requirements if earning halts. 

The Moment Coverage Finally Begins

Once the predetermined waiting period from the loss date concludes, insurers begin covering income shortfalls and operating expenses related to the interruption event. At this stage, accurate financial forecasting defines costs over the full interruption timeline known as the ‘indemnity period’ – the duration operations remain hampered until they return to normal profit levels. 

Insurers may issue incremental claim payments as projected losses and expenses accrue, requiring periodic financial updates. However, prompt initial steps like temporary relocations, marketing campaigns announcing reopening plans, and hiring contractors for rebuilding works all qualify for reimbursements after retention expires.

Avoiding Delayed Claims

While essential for cost containment, overlong waiting periods risk businesses struggling without adequate operating funds before claims activate. Seek specialist guidance ensuring retention terms match your continuity planning capabilities. 

Also, have alternate financing options in place to bridge coverage gaps if delays drag past expectations.

Get Business Interruption Insurance Cover 

With the right planning, business interruption policies can power through the worst disasters. Just ensure timing provisions line up with operational realities before the worst-case scenario ever arises. 

At Brisco Business, we understand the unique challenges and risks that businesses face. Our expert team is dedicated to helping companies like yours find the right coverage to protect your financial stability and keep your operations running smoothly, no matter what unexpected situations may come your way.

Get in Touch with Brisco Business

Contact Brisco for a quote today to learn more about our comprehensive business interruption insurance solutions and to get a quote for your company. With the right coverage in place, you can focus on what matters most: growing your business and achieving your goals.

Darragh Timlin

With over 25 years’ experience, Darragh is an expert in all things insurance. Starting his career in commercial property underwriting, Darragh has worked for a number of global insurers and is now Managing Director of Brisco Business, part of the wider Henry Seymour Group.

All articles by Darragh Timlin

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