Insurance Claim Tips for Business Owners

Most business owners don’t necessarily think about their insurance coverage until a loss occurs and they need to file a claim. However, the time to analyze your insurance is before you need to file a claim: Preview is always nicer than review.

If you do suffer an insured loss, you need to be very familiar with certain aspects of your claim. Here are the three areas that cause the biggest business insurance disputes with insurers.

Period of Restoration – This is the duration of time your loss will be based upon. The period of restoration begins 72 hours after the physical loss or damage occurs. This is sometimes referred to as a time deductible since coverage does not start until after the 72 hours expire. This period can be reduced or eliminated with various endorsements.

The end of the period of restoration can be difficult to calculate because it’s subjective. The date theoretically ends at the earlier of when the property should reasonably be repaired or replaced, or when the business is resumed at a new permanent location.

The insured may be given additional time to replace stock or supplies, or for a manufacturer, time is given to bring production back to the pre-loss point. But what’s a reasonable period of time to repair or replace the property? With no hard date for when the period ends, disputes arise. If you’re a tenant and your lease requires the landlord to repair the property, then you’re at the landlord’s mercy. Your claim can be adversely affected if the landlord is slow. These days, it’s quite possible the landlord doesn’t have the financial ability to make those repairs. In this case, it may be best to relocate, fast.

After the property is repaired, it’s very likely to take months before you return to your pre-loss sales volumes. Unfortunately, this is outside the period of restoration and your coverage may be history. That’s why we recommend adding an “Extended Period of Restoration” endorsement to your policy to provide coverage in 30-day increments.

Extra Expense Coverage – Any expense incurred to mitigate your loss is considered an extra expense. If your business had to relocate to resume operations in order to retain your customers, then the costs of doing so would be considered extra expenses. Be sure your policy provides an adequate amount of extra expense coverage.

Proving the expenses incurred relate to mitigating your loss can be another area of contention. Be sure to keep the insurer aware of all expenses you are incurring. Get written confirmation from the insurer that it will pay for those extra expenses.

Calculating the Amount of Loss

Your policy should provide coverage for the amount of net profit you would have earned had no loss occurred, as well as continuing normal expenses. Determining the profit you would have earned can be challenging. No wishful thinking allowed.

Two key components in determining what you would have earned are your sales forecast and your previous year’s results. If you happen to suffer a loss during a seasonal peak period of time but your business was not meeting its current year sales projections, then you may find yourself in the middle of a dispute.

Will you be able to prove you would have met your sales forecasts during your period of restoration even though you had not met them prior to the loss? If your business is seasonal in nature, you will need to work diligently to keep from losing your key customers as you may not have another opportunity to get them back until the following year. Can you prove you lost them as a result of the insured event?

If you suffer an insured loss, you should focus all of your attention on mitigating your loss and returning to normal operations as quickly as possible. It may be prudent to hire a professional public insurance adjuster – a third party expert so you’re not forced to rely on your insurance claims agent – to assist you in the preparation and calculation of your loss. That way you can focus on your business.

About the author

Ron Reitz is president of San Diego-based Quality Claims Management Corp., a nationally licensed public insurance adjuster, providing hazard claim recovery services to investors, mortgage servicers, homeowners and businesses. Earlier, he pioneered the national hazard insurance claims business of GMAC-RFC (now GMAC-ResCap).
He is the past president of the California Association of Public Insurance Adjusters and currently serves on the board of the National Association of Public Insurance Adjusters. Contact Quality Claims Management at (866) 450-1183 or


This article is very true. I

This article is very true. I am going through the long and complex problem of dealing with insurance/lawyers/adjusters for my two businesses (one just started 4 months ago) which received totaling damages due to a fire.

Thankfully, having gone through Hurricane Katrina, I stayed on top of my insurance policy and basically know it like the back of my hand.

Had this just been a normal claim, things would be going a lot easier, but it also involves a legal suit with the energy company.

Definitely agree on getting outside experts to help - the tasks of trying to tie up everything with the fire added to the hard work of trying to rebuild are very taxing. And while most clients and customers are understanding, be prepared for those who say, "I'm sorry to hear about that, but where's my stuff".

While you have suffered a loss and want to resume operations as quickly as possible, your customers and clients don't want their business to be interrupted so they want whatever products/services they were owed despite your losses or possibly inability to produce.

Don't expect the process of restoration after a loss to be rapid. Everyone is going to look out for their best interest which results in complicated negotions.

And of course remember to turn to the experts and resources at ideacafe.

Percy Marchand
Winner of the 2006 Idea Cafe Pilot Grant
Owner and Operator: Marchand Ink and Renaissance Reception Hall

If you guys are still in contact with Ms. Francie Ward, tell her I said hello!

Very Interesting Blog! Thank

Very Interesting Blog! Thank You For Thi Information!

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