Certain commercial insurance options can protect a business from physical damage to its property from fire, vandalism, windstorms, major snowstorms, and other similar events. Sometimes, the damages that result from these incidents can prevent a business from operating altogether. In these instances, the business’s earnings may decline sharply or even cause a business to close.
Business income coverage can help to supply protection against certain financial losses that are sustained while a business is unable to operate. Here’s a better look at what business income insurance is and how it can help.
What is Business Income Coverage?
Business income includes net income (i.e. what a business earns if no loss has occurred) and continuing expenses (i.e. normal operating expenses that must be paid after a loss). Business income coverage protects against lost business income.
Many businesses earn income by providing a service or a series of products. Other businesses earn some of their income, if not all, by renting out their premises to tenants. If a building ends up being damaged to where it becomes uninhabitable, the entity who owns the building will lose rental income.
Requirements for Business Income Insurance
Losses in business income can only be covered if all of the following conditions are satisfied:
- Income Loss: A business suffers an income loss due to a necessary halt of its operations.
- Physical Loss: The suspension in business results from damage by a covered peril to property. Covered perils usually include theft, vandalism, and different types of storms.
- Schedule Limit: A business income limit has to be scheduled for the premises where a physical loss takes place.
- Restoration Period: A suspension must happen during a time period called the period of restoration.
Business income insurance applies to an income loss a business suffers due to physical damage to properties caused by a covered loss. The damaged property doesn’t have to belong to a business and doesn’t have to be covered property under a policy. The income a business loses due to a shutdown or suspension of operation should be covered by a business income coverage plan.
Business income insurance should cover income a business loses during the period of restoration. Under many business income programs, the period of restoration begins a few days after physical loss has happened. This gap in coverage is a deductible called a waiting period, usually around 72 hours.
This restoration period usually ends when the damaged property at the premises is repaired. If a business moves to a new location, the period of restoration ends when business resumes at their new location.
The Hilb Group
Deciding what coverage you need and what limits and deductibles make the most sense can be tricky. Founded in 2009, the Hilb Group has been helping clients to make sense of their options and make the smartest choices for their circumstances. Whether you need Warehouse Insurance or any other type of business or personal coverage, we encourage you to contact our friendly, experienced, and capable team today. Call us at (800) 776-3078 for a consultation.