Business Income Coverage

Business Income Insurance

Most business owners would describe owning an enterprise as a wild ride. Being the boss can feel exhilarating, but with great freedom comes great responsibility. Every business’s primary objective is to generate revenue. Therefore, it follows that loss of income is always a concern for every business entity. Fortunately, there is business insurance coverage that can help restore lost income in the event of a costly disaster.

Business Income Coverage Insurance

Also known as business interruption insurance, business income insurance is a type of coverage that compensates an insured business for income the business loses as a result of a disaster. Unlike property insurance, which covers loss of a business’ physical property, business income insurance covers profits a business would have earned if the business had not been forced to close or rebuild due to damage caused by a disaster.

How to Get Business Income Coverage

Business income insurance is typically offered as an add-on to a business property insurance policy or to a business owner policy (BOP). In some states, businesses may purchase business income coverage as a standalone insurance product. Business income coverage only pays the policyholder if the disaster is covered by the overarching BOP or property insurance policy. If the coverage is purchased as a standalone product, the disaster must be a defined event listed within the verbiage of the policy.

What is Covered?

While lost profits are primarily covered, there are other types of losses for which a business may be compensated through business income coverage. If a cause of loss is covered, the insurance company may also compensate the business for:

Operating expenses and other fixed costs
The cost of moving to and operating from a temporary location
Costs associated with retraining employees to use replacement machinery
Extra expenses that allow the business to continue to operate
Government-ordered closure or relocation that affects profits

Coverage extends to the end of the interruption period as defined by the insurance company. For additional coverage, businesses may purchase contingent business interruption insurance, which compensates businesses when their suppliers are disrupted by a disaster.