Business Income Coverage: Saving Your Business from Failure!

Imagine this: You own a deli shop and operate that business in a commercial space that you rent. Your income is derived entirely from meat and other food sales. One day, a tornado blows through town, damaging your shop severely. The building is now unusable, the refrigerators are gone, the interior of the shop has been damaged, and all of your meat has spoiled.

A typical property policy will cover the cost to repair or replace buildings or equipment, but it will not cover the loss of income a business is likely to experience during the time period between the occurrence of the loss and the resumption of the business operation.

Business Income or Business Interruption is protection against loss of income or profits, in which a business has suffered a property loss or damage from a covered peril, such as a fire, natural disaster, theft, or vandalism. This covers the time when the business is shut down until property is repaired or replaced.

So, I won’t lose any of the sales I would have made in a given day?

Before Business Income steps in, there is a Waiting Period. A waiting period is essentially a deductible expressed as time. The typical waiting period before Business Income coverage begins to pay is 72 hours. So, you’d lose those first 3 days of income you would have made. However, you can talk to your insurance agent about having the waiting period changed to 24 hours, or even no waiting period.

Going back to our scenario: Let’s say your meat supplier hasn’t been affected by the storm. You decide to rent space at another location to operate your business temporarily until your permanent location has been repaired.

Would that cost be covered?

Extra Expense Coverage is defined as commercial property insurance that pays additional costs in excess of normal operating expenses that an organization incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss.

This means that the cost to rent the temporary building, renting a temporary refrigerator, or even moving to the temporary location are covered under Extra Expense coverage.

Our scenario above demonstrates the value of Business Income and Extra Expense coverages to businesses of every size and industry. A business that is adequately insured in the event of physical damage to their property may never have a chance to resume operations after a loss because they could not cope with the loss of income while they waited for the replacements or repairs to be made.

Talk to a Hausmann-Johnson Insurance Consultant to make sure you’re getting the appropriate Business Income coverages needed for your business.