Many commercial property policies do not automatically include this type of coverage. But, can you afford to be closed for business while repairs are being made to your building after a fire or other loss? The good news is that you can add Business Income and Extra Expense coverage to cover the loss of your business income while you are closed for repairs plus extra expenses that you incur to keep going in spite of the loss. Also known as Business Interruption Coverage, these policies may just be the lifeline that saves your business after a disaster.
Business Income Insurance
Business Income does not mean profit. It means the net income (positive or negative) plus the cost of continuing expenses that are lost due to the direct physical loss during the period of restoration. The direct physical loss must be caused by something that is a covered cause of loss in your commercial property insurance policy. You also have the option to include your payroll.
Business income is designed to help in the following situations:
- Net Income (Net Profit or Loss before income taxes) that would have been earned.
- Operating expenses, such as utilities, that you may incur even if the main business operations have temporarily stopped.
- Some policies cover expense you incur while operating out of a temporary location.
Extra Expense Insurance
Extra Expense coverage reimburses your business for actual and necessary extra expenses beyond normal operating expenses due to a direct physical loss. These are expenses you incur during the period of restoration that you would not have had without a loss. For example, renting a temporary location, relocation expenses and the cost to equip and operate the replacement location or temporary location. This coverage can also pay you to try and reduce the amount of time you are closed.
Length of Business Income Coverage
You can choose the length of time. Some policies offer a maximum of 12 months, but the coverage can be as short as 3 months. Business Income coverage ends when the coverage limit is exhausted or when your business is back in normal operation. Whichever comes first.
There are numerous additional coverages related to Business Income and Extra Expense Insurance that can be used to further customize your policy. Let us explain the different options available for this type of coverage plus the length of coverage choices that are available. For more information about commercial property insurance and business income coverage email me at TKrider@InnerHarbourFLA.com or call me at (850) 837-3629.