Does the operation of your business rely heavily on the use of a physical location or specialized equipment? If so, your business insurance portfolio may not be complete without business income coverage, also known as business interruption coverage.
Imagine a claim scenario, such a large fire or natural disaster, that causes substantial damage to your business location or equipment. Your property insurance policy will typically cover the cost to repair the building and replaced the damaged contents or equipment. But just as devasting, and often overlooked, is loss of business income that could occur during the time your property is being repaired or replaced.
Business income coverage protects against this type of scenario and is an option that can be added to most property insurance policies. Some policies, such as BOP, may already include loss of business income coverage. To understand this coverage more fully, it is helpful to define some key terms:
Business Income Coverage Defined
Is your net income (before taxes) from business operations plus continuing normal operating expenses, including payroll.
It is important to note that the insurance company will pay for the reduction in your income caused by a covered loss that suspends normal business operations.
Extra Expense Defined
Many business income or business interruption policies also include coverage for extra expenses that are created as a result of the covered loss. These are expenses that may help you resume operations sooner, thus reducing the total business income claim. For example, your insurance carrier may pay for expedited shipping on replacement inventory. Or, you may rent equipment and temporary space to run your business while repairs are being made at your primary location.
Loss of Business Income Claims
The key to being fairly compensated for a loss of income or business interruption claim is documentation. The adjuster will expect you to show how the covered loss has affected your current net income with accounting records. Typically, the adjuster will compare income from the same period prior year with your income post-loss. If your income was trending upwards before the loss occurred, you’ll need to show that with accounting records as well.
Get a Quote for Business Income Coverage
If your current business insurance plan does not include business income coverage, also known as business interruption coverage, contact our professional team today. We can help you understand the business interruption risks you face and develop a coverage strategy to protect you today and in the future.