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Fire & Water - Cleanup & Restoration

How Much Revenue Can I Lose After a Fire Damage?

10/16/2022 (Permalink)

Two men with a shovel and a plastic bag cleaning debris inside a restaurant due to fire damage Fire cleanup in a restaurant.

What Happens If Your Business Slows Due To The Interruption Of a Fire

A fire at your business is the last thing you want to deal with. But you can't help but worry about what will happen if your income slows due to the interruption of a fire. Luckily, there is insurance for that: business income coverage.

Before we get into exactly how much revenue can be lost after fire damage affects your business, let's talk about why this type of coverage exists in the first place. Business income insurance helps keep your cash flow coming in after an unexpected event like a fire damages your building or other property. You may be wondering why this is necessary if you've purchased another kind of commercial property policy (like comprehensive or all-risk). If something happens at one part of my building but not another part (and it doesn't affect all parts), then isn't that covered under these other policies? The answer to that question depends on who owns what aspect of the structure damaged by fire:

What is business income coverage?

Business income coverage is a type of property insurance that pays for the loss of income from a covered event. It also goes by the name business interruption insurance and can help pay for extra expenses that keep your business running in the wake of a disaster.

Business income coverage has two parts: indemnity and expense reimbursement. The indemnity component covers lost profits when your commercial property is damaged or destroyed, while the expense reimbursement component ensures money isn't an obstacle to getting back on track after an incident occurs.

Income coverage and extra expense coverage.

An income loss coverage will help you with the loss of revenue after a fire. The reason why this type of coverage is called an “income” loss coverage is because it will cover your business’s income, not its overhead costs.

An extra expense coverage can help you pay for other expenses that arise because of damage to your property, like additional wages for employees who need to work overtime in order to get everything done on time. If your business has employees, you should definitely consider getting this type of policy as well.

Other ways income coverage can help.

When it comes to income coverage, the best way to know you’re properly insured is to speak with a qualified insurance agent. They can help you understand what your policy covers, and whether it will be enough if your business is damaged in a fire.

There are a few things that can affect the amount you can recover after a fire damages your business. Let's look at some of them:

  • The amount of damage to the business. If your business is severely damaged, it will cost more to repair or rebuild and open again than if it was only slightly damaged.
  • The amount of time your business is closed due to fire damage. If you must close down for several months while repairs are being completed and new equipment installed, you'll lose money that could be used towards paying off debt or investing in other areas of your company.
  • The type of insurance coverage you have on hand at the time of fire loss (or other disasters). If other insurance policies cover certain types of losses related to fires—such as liability claims from injuries caused by smoke inhalation—it may be possible for those policies' limits to exceed what's offered through commercial property insurance alone.

How much revenue can be lost?

The damage from a fire may affect your business in two ways: the immediate loss of revenue and the long-term loss of revenue.

The immediate loss of revenue occurs when your business is unable to operate due to fire damage. For example, if you are a restaurant and your building has sustained significant damage from smoke or water infiltration, you will likely be unable to open for business until repairs are made and inspections completed. The loss during this period may be temporary or permanent depending on the extent of damage sustained by your property and other factors related to the situation at hand (elements such as insurance coverage).

Business income insurance helps keep your income coming in after fire damage.

There's a type of commercial property insurance that can help you recover the revenue you lose after fire damage. It's called business income insurance, and it's designed to cover the losses your business sustains when you're unable to sell goods and services due to an insured property loss.

Business income insurance covers your costs for things like:

  • Lost profits, including lost revenue from sales (some policies will reimburse you for the cost of goods sold)
  • Additional advertising expenses caused by the interruption in your business operations (e.g., newspaper ads)
  • Extra wages paid to employees who were unable to work because of the fire

Remember that it's important to get business income insurance. In the event of a fire, this insurance can help you keep your business running and make sure you're protected against losses like this in the future. We hope you found this article helpful as well!

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