One thing that 2020 has taught us: expect the unexpected. For small businesses, when the unexpected happens, business insurance can be an invaluable ally. Surveys have shown that 40 percent of small businesses file claims against their insurance policies.
Businesses can face events such as:
- Catastrophes like hurricane, flood, and wildfire
- Theft of merchandise, products or equipment
- An electrical fire
- A customer is injured on the property
Any of these examples have the potential to temporarily close down your business. If you have the coverage your insurance carrier will cover your related expenses up to the limits of the policy.
Business Insurance Claims: How to File
To get you on the way, you’ll need to file a claim with the insurance company.
- Demonstrate that a peril and/or your loss occurred. Photograph and videotape any damages your business sustained.
- Keep contact information for any witnesses if someone is injured on the property. Something of value might come to the surface that shows you weren’t negligent.
- File a police report. A police report, or incident report, is especially important if there’s property or physical injury. If you don’t have an incidence report, most insurance companies won’t cover damage caused by vandalism, theft or other criminal activity.
- Read through your commercial business insurance policy. You can make sure you’re covered and look to see if there are any special requirements when filing a claim (details can vary depending on the carrier).
- Contact your insurance provider as soon as possible after the event. Depending on just how extensive the damage is, the insurer may have an adjuster inspect the property. You then have 60 days to provide proof of loss. Note that if you have documented the event with police reports and attained medical attention for any injured individuals you can reduce your risk of being sued.
- Take inventory of the damages. Take inventory of damaged or destroyed items and provide your insurer or adjuster.
- Photograph or videotape the damages or injuries. By documenting the event with visual evidence can you have “proof” to fall back on if need be. Photographs and videos can be used as evidence of the initial loss. If someone was injured, photographs can show the injuries.
- Make temporary repairs as appropriate while your claim is being reviewed. If your business is still accessible, make simple repairs to keep it safe. Hold onto receipts, which you can submit them for reimbursement. Be sure your repairs are indeed temporary, such as putting a tarp over a damaged roof rather than having it reroofed at this time. Make your business as secure as possible and reduce the chance of further damage. Cover exposed areas, remove debris, board up windows, replace broken locks and so forth.
- Get bids on doing permanent repairs. Secure two or three bids for major repairs, in order to substantiate your claims and to be ready to start repairs when the time is right.
Documents to Gather for Claims
Liability Insurance Claims
If you are sued, or you might be sued, you are required to assist their defense team. One important task is to gather written records. Examples of what you might need to include:
- Repair bills
- Medical bills
- Witness statements
- Meeting notes
- Change orders
Property Damage Insurance Claims
Documentation can help establish your property’s damage.
- 2 or 3 repair estimates
- Inventory of damaged as well as undamaged items
- Proof of loss form, completed and notarized
Business Interruption Insurance Claims
If you have business interruption insurance you can be reimbursed for lost income, expenses and temporary relocation. This kind of claim might include:
- Sales tax returns
- Sales, production and inventory records
- Tax returns
- Payroll records
- Bank statements
- Relocation costs
When to File and When to Not
When you have business insurance, you are trying to protect your assets in the event of losses. But there are times when it is better to not file a claim.
When to File Claims
Here are some examples of situations when filing business insurance makes good sense.
- You can’t afford to pay for repairs or damages.
- Your business sustains large losses and you run the risk of having to close down permanently.
- You are sued. Typically, your liability insurance policy requires you to report the suit with your insurance carrier.
- If your business has to temporarily closed due to a covered event, you can file a business interruption insurance claim to pay for lost revenue and expenses that occur.
When Not to File Claims
A history of filing business insurance claims for multiple losses can result in raised premiums. In fact, they stay on your record for up to seven years. Sometimes deciding not to file a claim is the best path to take. The following situations are examples of times you might want to avoid filing business insurance claims.
- If you’ve filed multiple claims, you are more likely to be seen as a risk and could see your premiums go up.
- The costs for repairs are less than your policy’s deductible. If this is the case, paying out-of-pocket for minor repairs can guard you from raised premiums.
- If you have filed multiple claims or certain types of claims, the insurance provider might opt not to renew your policy. The insurance company may decide to drop you as a customer, for instance, if water damage is a recurring problem.
Conclude Your Claim
In most states and depending on the type of claim, insurance providers have 30 days to either accept or deny claims. If your claim is denied you will receive a notice. If your claim is accepted, the insurer has 30 days to send you payment; you will typically be asked to sign an acknowledgement that you received the reimbursement. Or, rather than payment, you might receive an explanation of their denial of your claim.
Want to Appeal? Here’s How
If you want to appeal your insurance provider’s conclusion, send the insurer a written notice and outline the issues. The insurance company will send a second claims adjuster to re-evaluate. Potentially, your insurance carrier could reverse the original conclusions.