Written By: Melissa Comparri, CISR, SBCS, Account Executive

Business Income Insurance Coverage, also referred to as Business Interruption Insurance, works with your property policy to provide protection against loss of income if your business is shut down due to a covered cause of loss such as fire or natural disaster.

It helps to cover rent or mortgage payments, taxes, payroll, and lost profits. It is not a separate policy, it is endorsed or added onto your property policy for an additional premium.

Exclusions

Some events that would be excluded from business income coverage might be:

• Floods & earthquakes since they fall under a separate policy
• Diseases & pandemics such as the Coronavirus that shut down many businesses to minimize the spread of the virus

Property Insurance

Typically, Property Insurance covers the cost to repair or replace your building due to a covered cause of loss but does not cover the loss of income or normal business operating costs, while your business is closed during that time.

The time in which the loss occurred, to when the property has been repaired or replaced, is called the restoration period.

Restoration Period

During the restoration period you may incur expenses that are above and beyond your business’s normal operating costs, while you continue to operate.

For example, locating to a temporary site while your building is being restored or replaced, buying or leasing equipment while at the temporary site, and overtime for employees or hiring temporary workers.

Extra Expense Endorsement

Under Business Income, Extra Expense Coverage can be purchased as an endorsement to your policy to help with these expenses and only applies to those expenses that arise during the restoration period.

Factors that Impact Coverage

When deciding on whether you want to purchase this coverage, you need to look at how vulnerable your business can be if a claim occurs and is shut down for a length of time.

Would it be easy to move to a temporary location to resume business during the restoration period?  How would a shutdown affect you financially?

To estimate how much Business Income coverage you might need, follow the below steps::

• What was your net income and total operating expenses for the last 12 months, as well as the estimated amount of expenses for the next 12 months
• Estimate how long you may be shut down if you have a loss
• Figure how much would it cost to cover Extra Expenses needed to maintain your operations or to reduce the period of shut down

Remember, these coverages are in place to give you, the business owner, options to cover your business’s financial well-being in the event a claim occurs.

Please contact our office to speak to an Account Manager to discuss your business income insurance needs in more detail.