Most business owners understand the importance of securing adequate property insurance. An often overlooked companion to your property insurance, and potentially just as important, is business income coverage. More specifically, the loss of your business income due to a covered property loss.
Imagine for a moment that your business suffers a terrible fire loss. You are forced to cease operations for several months while building repairs are made and new inventory, furniture, and fixtures are secured. During this time you are unable to sell product or provide service to customers. Revenue falls to essentially zero, but you have continuing expenses that must be paid such as rent, mortgage, equipment leases, utilities, and payroll.
Business income coverage provides for this loss of revenue and continuing expenses. Most policies define business income as “net income (net profit or loss before income taxes) that would have been earned or incurred and continuing normal operating expenses including payroll” (ISO CP0003). This verbiage will vary slightly between policy forms, but the intent is to provide coverage for your lost net income and pay your continuing expenses, including payroll for owners, managers, and employees.
In addition, some business income policy forms will pay for “extra expenses” that help to reduce the amount of lost revenue, or the duration of your claim. Examples of extra expenses include leasing a temporary location, temporary furniture and computers, and expedited shipping of inventory.
Please take a moment to review your business insurance portfolio and see if business income coverage is included. Talk with your agent about the specific terms of your coverage, and any enhancements that are available. Your business insurance is incomplete without business income coverage.
If you have further questions, call Ryan Dye at 702-508-9253.