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Denied Claims For Commercial Insurance "Business Interruption" Damages

Natural disasters can halt your business operations, causing you significant losses. Thankfully, business interruption insurance closes that gap so your company can stay afloat in spite of unforeseen catastrophes.

In light of the recent wildfires in California, a business interruption claim may be in the forefront of your mind, especially if you are a commercial policyholder. Knowing how to file a solid claim is key to having it approved so you can restore lost profits quickly. If you want to get the best chance at recovering from financial losses, you need to prepare all the information that your insurance company requires.

What should you expect when filing a claim?

Your main objective is to present enough evidence to prove that your business can earn a certain amount of profit while your business was interrupted. This information includes your business' history, expenses, and revenue. Provide detailed answers to the following questions: How did your fiscal year end? Where is your business located? What goods do you produce or what services do you provide? How many employees do you have? Who are your main suppliers and customers? What are your hours and days of operation?

Tell them what you normally earn and spend.

Your next step is to provide as much data as possible about your typical earnings and expenditures during normal business operations. This includes your income statements, which could be yearly or monthly. You can also provide tax returns, bank statements, sales tax returns, all your accounting books and software, sales records, receipts, sales forecasts, and business plans.

Regarding your expenses, include data from the time period before, during, and after the incident. Submit your payroll and payroll tax records from all your employees. Show your lease agreement and rent expenses, if applicable. How much are your utility bills? Do you have any loans, contractor estimates, or receipts for work that has already been done?

Describe how the event impacted your business.

Finally, you need to describe how your business was affected by the wildfires. Between what dates were you unable to conduct business? How many earnings did you miss out on, and how many bills accumulated while you weren't earning? Was there any damage to your business as a direct result from the wildfires that caused ceased operations?

Your insurance company will utilize all the information you provide. They will then take your net income, add it to your continuing expenses and any other expenses during this period when your business was interrupted. This sum would equal the total business interruption loss.

Make the strongest case possible.

The goal of Business Interruption insurance is to give you the profit you should have earned as if the wildfire never happened. To make sure your claim isn't denied, be as specific as possible with your usual earnings and expenses. Also, be sure to prove that your interruption was a direct result of the wildfire. A strong claim will have a better chance at restoring any of your lost profits during a period of halted business.

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