Understanding Business Income Insurance
Business income insurance is coverage that can be paired with a business’ property insurance policy or comprehensive package policy (such as a business owner’s policy, or BOP). This coverage covers the loss of income a business would suffer after a disaster. The lost revenue covered may stem from the disaster-related closing of the company or the rebuilding process after a catastrophe.
Coverage Provided by Business Income Insurance
The additional coverage allotted by a business income interruption policy covers the profits that would have been earned – unlike property insurance, which includes only physical damage to the business. The additional policy provisions can help all kinds of companies. Its purpose is to return a business to the same financial position it would have been in before the loss. An example would be if a store next to your commercial building caught fire, and the fire spread to your location. Firefighters worked hard to extinguish the blaze before it destroyed the building, but there is much damage and it’s clear you won’t be able to return for some time, maybe months. You also suffered a significant loss of merchandise during the fire. This will put you in a tough spot as you try to figure out how to generate income while you wait for new merchandise.
A business interruption insurance policy often covers the following scenarios:
Earnings. Profits that may have been earned during the loss (the amount is determined by referring to the previous year’s financial statements).
Fixed Costs. Operating expenses and other costs (like rent) that are still being incurred by the property (based on past expenses).
Temporary Location. Some policies may cover the extra expense of moving to a temporary place to work.
Commission & Training Cost. The policy primarily cover the cost of providing instruction to the operators of the machinery replaced by the insurer following the loss.
Extra Expenses. Reimbursement for expenses incurred outside fixed costs, which allows the business to continue to operate while the property is repaired.
Civil Authority Ingress / Egress. Forced Government-mandated closure of business premises that directly causes loss of revenue (like government-issued street closures related to a covered event, or curfews).
Business Income Claims and What You Should Know
Every business has different coverage needs, and there is no universal answer. Keep this in mind when deciding how much coverage you may need. For example, a small manufacturer may require different coverage than a clothing store. It is always best to discuss coverages with your agent so that they can answer any questions you may have.
One thing your agent may not be able to help you with is if the insurer denies your business income claim or pays out only a small amount. That’s when the team of experienced insurance litigators at Louis Law Group can help. Contacting an experienced business income lawyer could mean the difference between reopening in a few weeks or closing your doors forever. Contact us today for a no-cost consultation.