A kitchen is to a restaurant what an engine is to an automobile. As the operations hub, it keeps the patrons satisfied and the profits flowing. If unexpectedly closed, the consequences can be grim, negatively affecting the restaurant’s bottom line and reputation.
Business interruption insurance can help restaurants cushion the financial blow associated with shutdowns. This coverage is not included in standard restaurant insurance but rather an addition or rider to a policy.
Coverage Essentials: What’s Included and What’s Not
Business interruption insurance is a lifeline for restaurants when faced with unforeseen events that render the kitchen inoperable. These include natural disasters, fire damage, power failures, civil authority, and vandalism.
This insurance covers other areas besides the kitchen, including dining rooms, bars, and storage.
Below are the main coverage essentials in business interruption insurance:
Lost Business Income
This covers the income that the business would have earned if the interruption hadn’t occurred. Insurance providers consider historical financial records to estimate the lost income during the interruption period.
Operating Expenses
Restaurant operators may have to pay some or all operating costs regardless of their operational status. These include rent, utilities, payroll, and taxes, all covered by business interruption insurance.
Additional Expenses
Costs are incurred to avoid or mitigate losses during the interruption period or while resuming operations.
These expenses include renting temporary kitchen facilities, advertising to recover lost customers, and expedited shipping for essential equipment. Business interruption insurance reimburses these expenses.
However, business interruption insurance does not cover every type of disruption. For example, it won’t cover losses caused by voluntary closures or planned maintenance.
Some policies may also not provide coverage against losses resulting from government-mandated closures and delayed reopening following a covered peril.
How to Tailor Your Business Interruption Insurance Policy
Restaurant owners should customize their business interruption insurance policy to cover their establishments adequately. This could involve:
Evaluation of Coverage Needs
Restaurant owners must determine risks that can hinder their operations and how much they stand to lose should these risks occur. This helps determine the appropriate clauses to include in the policy and ensures sufficient coverage.
Understand Policy Terms and Limits
Business interruption insurance has specific terms, conditions, and limits that dictate coverage. Restaurant owners need to review their policies to understand what is covered closely.
Customize Coverage Limits
Coverage limits are the maximum amount an insurer will pay for a claim. Standard policies may not provide enough coverage, especially for large restaurants. Customizing coverage limits to reflect your restaurant’s income and expenses is important.
Extended Period of Indemnity
This provision extends the indemnity period beyond the reopening date, accounting for the time it takes to regain pre-interruption income levels.
For example, if it took three months to get back to full operation after a fire, this clause would cover any lost income during that extended recovery period and additional expenses.
Contingent Business Interruption Coverage
This covers lost income from a supplier’s shutdown or disruption in their operations. For example, if your primary food distributor experiences a disaster that affects their ability to provide you with ingredients, this coverage would compensate for any lost revenue.
How to Navigate Business Interruption Claims
In case of a business interruption from a covered peril, restaurant owners should act quickly and diligently.
Notifying Your Insurer As Soon as Possible
Timely notification helps the insurer investigate and process your claim faster. In addition, untimely notification is a major reason for claim denial.
Documenting Losses
As already established, business interruption insurance reimburses financial losses up to a certain limit. The losses must be substantiated if the claim is to be honored. As such, it’s important to detail all lost income and expenses with verifiable proof, such as bank statements, receipts, payroll documents, and tax returns.
Working With Seasoned Insurance Professionals
Business interruption insurance is essential to a restaurant’s insurance portfolio as it can impact continuity. It’s only right to treat it as such, from underwriting to claims processing.
Restaurant owners should work closely with seasoned insurance professionals who can help tailor suitable policies and guide them through the claims process.
Protect Your Restaurant’s Future With Pro Insurance Group
The experienced agents at Pro Insurance Group are the trusted partners for restaurant owners looking to safeguard their business interests. With various restaurant insurance carrier options available, they can tailor comprehensive business interruption insurance coverage to fit your budget and business needs.
Contact Pro Insurance Group today for a personalized restaurant insurance policy.