Business income insurance, also known as business interruption insurance, helps cover the loss of business income if you are unable to operate due to damage sustained due to a covered cause of loss.For hotels and resorts, some commonly covered perils include property damage caused by fire, lightning, tornados, hurricanes, and water damage.
For example, let’s say your hotel suffered serious damage from a hurricane. Unfortunately, you will likely have to shut down the hotel to repair the damaged property. This is where business income insurance steps in to cover your lost income and expenses during this time. This coverage applies an extra layer of protection beyond general commercial property insurance.Thank goodness you opted to add business income insurance to your coverage plan, right?
But, you might be wondering, in the event of a business income loss, what steps do I need to take? And what information do I need to save to provide to an adjuster after a claim has been filed? Keep reading to learn more about the steps to take and information you need to file a business income loss claim.
Filing a business income loss claim
First, refer to your insurance policy to determine the claim process. Does the policy require notification to the insurer within a specified period after the occurrence or are you required to. have documentation supporting your claim prepared prior to submitting your claim? Each insurer may have different procedures to follow. If you do not understand your policy, contact your insurance agent and ask for clarification.
Organize the documents you think you will initially need (see list below). Keep copies of everything you provide to your carrier, document when they were provided, and keep records of all correspondence with your insurer, as well as information on when you expect to hear back from them. The more you document, the better!
What information do I need to save to file a business income loss claim?
As mentioned above, the best way to ensure your claim is processed smoothly and covered sufficiently is to provide solid documentation. Be prepared to provide the following documents:
● Income statements for the last two years
● Income statement prepared just prior to the business income loss occurrence
● Projected income analyses performed prior to the business income loss
● A current projected income analyses
● Balance sheets for the last two business years
● Payroll records from before and after the business income loss occurrence
● Names, salaries and dates of all staff layoffs
● Tax returns for the last two business years
● State sales tax returns for the last two business years
● Copies of current utility bills and any other operating expenses
● Major customer contracts
● Major vendor contracts
● Records establishing ongoing business expenses
● Inventory records
● Occupancy records for the last two years
● Occupancy percentage and average daily rates
● Estimated lost room revenue
● Estimated restaurant/room service revenue lost
● Lost income due to reservations and event cancellations
● Banquet bookings for the last two business years
● Estimated banquet revenue lost
● Estimated lost spa revenue
● Estimated loss of retail sales
● Estimated loss of bar/liquor proceeds
● Accounting of fixed fees and permits that still need to be paid such as liquor licenses and franchise fees
● Estimated costs to sanitize and clean for reopening
Every policy is different, so this list should not be considered all-inclusive, BUT it’s a great place to start when preparing a business income loss claim.
Complexities of business interruption claims
Filing a business interruption claim is not always as simple as it seems. Business interruption claims are complex because they involve predicting the future (estimated losses if the business was operating normally) as well as commonly-disputed coverage issues.
Why not be prepared (and protected) for unexpected losses rather than scrambling at the time of a loss? An effective risk management strategy involves addressing potential business interruptions in advance.