It’s the call you never want to receive as a business owner. A fire swept through your restaurant.

On a personal level, you’re devastated, but you still have to lead your staff through this heart-wrenching disaster. Thankfully, before the disaster you had purchased business interruption insurance so you can at least assure your staff that they can still expect a paycheck.

Business interruption insurance replaces lost revenues, income, and some additional expenses incurred for a covered loss. As an example of an additional expense, say you decide to temporarily relocate your restaurant—business interruption insurance may cover that relocation. The insurance should be part of every business owner’s policy. Here’s why and what you should know about it.

Accounts for what you don’t expect

Business interruption insurance covers many events beyond your control. Maybe that’s a fire or a tornado or earthquake. It’s easy to think that it won’t happen to you, but an estimated 5,600 restaurant fires are reported to U.S. fire departments each year, resulting in $116 million in property damage. No one can expect the unexpected.

Covers lost income and additional expenses

As mentioned earlier, business interruption insurance covers lost revenues and income, which is usually enough of a reason for restaurant owners to ensure they have it. It may also cover relocation if you cannot operate the restaurant in its current location while cleanup is occurring. It may even include utilities if, for example, the electricity is still on while cleanup is occurring but the restaurant is not able to be in operation. Of course, every situation is different and would have to be reviewed by a claims adjuster and would depend on the exact language of the policy, but it’s important to note the options that might be available to you. 

Takes into consideration time, quantity and profit

To be clear, like any insurance claim, there are many variables taken into consideration when you make your claim in order to determine how much money you will receive. An adjuster will take into consideration the time lost, the quantity of goods usually sold during this time frame and the value of the goods, or profit. This is why it’s essential that you, as the restaurant owner, keep detailed financial records because the average calculations are often based on documentation from the year prior. It’s also advisable to retain an insurance attorney to help you with your claim.

Adding business interruption insurance to your existing coverage

It’s important to note business interruption insurance typically cannot be purchased on its own. It must be added as a rider to an existing policy. If you do not have it, your carrier may make you wait until the next renewal period. This will depend on each insurance company. When you purchase business interruption insurance, you should:

  • Make sure you are covered for the timeframe it might take you to rebuild. Every restaurant is different. It might take longer to rebuild a fine dining restaurant than a fast-casual café. Make sure you account for how long you think it might take you to rebuild if you’re starting from nothing.
  • Similarly, consider how long it might take you to relocate if needed and the resources you might need. Are there several available commercial real estate options near your current location? Or would a relocation require you to move farther away and establish a new customer base?
  • Check that all safety features are in place, functional and up to current building codes. If this requires routine maintenance and inspection, make sure you keep records of both. Not only will this help to protect your business in the event of a disaster, but it will also help to process claims faster if you can quickly prove all appropriate safety measures were taken. For example, is your sprinkler system up to date, functional and up to code? 
  • Speaking of records, make sure you keep them in water and fireproof safes that could be accessed in the event of an emergency. This may include safety records; financial records; any deeds, leases or other important building transactions; and human resource records. You may want to consider digitizing these records if you haven’t done so already, and backing them up nightly to a “cloud” in order to ensure safekeeping.

Understandably, you can’t plan for every disaster that may strike. You can, however, have safeguards in place to protect you as a business owner, your family, your employees and your restaurant’s future.

Gregory W. Bair II is an insurance litigation lawyer and partner at Stock and Leader, Attorneys at Law. To contact him or learn more about insurance litigation, please visit
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