Business Income Insurance Coverage
Business income insurance, sometimes known as business interruption insurance, helps cover lost income when your business must shut down due to a covered peril. Covered cause of loss includes:
For example, say your restaurant’s kitchen catches on fire. As a result, you must close down your business while you repair the damages. Your business income insurance can help pay your lost income during this time.
To fully understand your business income insurance coverage definition, you’ll need to understand these key terms:
- Actual loss. This refers to the monetary payment you receive from insurance covering the actual loss of income to your business.
- Business income. This includes any income that would result from regular business activity.
- Period of restoration. This refers to the waiting period when you are repairing your business.
- Extra expense. In some cases, you may encounter extra expenses when your business is temporarily closed for repairs and you have to move. This can also include the cost of expedited shipping on a replacement order of your business’s inventory.
- Service interruption/contingent business interruption (CBI). This refers to the interruption in your operation or the shutting down of your business. If your business is closed, there are still operating expenses to take care of.
- Leader property. This is an endorsement that helps cover physical loss or damage to your business. This includes damaged property that you may not have owned directly.
- Interruption by military or civil authority. When natural disasters strike, civil authorities may order evacuations. You may have to shut down your operation as a result. Depending on your policy, your business income insurance can help cover your lost income when you’re interrupted by civil or military authorities.
Business Income Insurance Coverage
Your business income coverage, also known as business interruption coverage or extra expense insurance, can cover lost income when you have to close your business suddenly. This coverage is an extra layer of protection beyond general commercial property insurance.
To better understand business income coverage, consider these scenarios:
- Say your candy shop is in an attached building. After the store next to yours catches fire, it spreads to your business. As a result, you have to shut down your operation to repair the damages. Your business income insurance can help cover your lost income during this time of restoration.
- Say you own a computer store. After you close for the day, thieves break in and steal valuable inventory. As a result, you have to temporarily shut down while you replace your inventory. Your business income insurance can help cover your lost income during this time.
- Say you own a sports equipment store. After a hurricane hits in your area, your building suffers from extensive wind damage. As a result, you must shut down your operation to repair the damages. Your business income insurance can help cover your lost income during this time of restoration.
The payout amounts you receive on your business income coverage are based on your business’s income and expense records. As a business owner, you should store these records in a safe location. You may even want to store them off-site or in digital locations.
While business income insurance can help you cover your lost income, insurance companies may not help cover lost income in the event of:
- Closures from inoperable power lines. Adding an endorsement to your policy can help cover this.
- Losses from closures caused by damages not covered under your insurance policy.
- Losses from partial closures.
- Income that isn’t documented.
It’s important to note that business income insurance may not also cover all of your business’s utilities.
Loss of Business Income Insurance
Business income insurance helps cover you and your business due to the loss of business income. Keep in mind that business income insurance is also known as business interruption insurance.
In another example, say your business burns down. As a result, you’re forced to move to a new location. During this time, your business income insurance can help cover your lost income. It could also help cover the extra expense of relocating.
As a small business, you want to reduce your risk as much as possible. At The Hartford, we can help teach you how to reduce your risk exposure. We offer a wide selection of commercial insurance coverages that are cost effective and help businesses put their best foot forward. Our coverages will help you through unforeseen losses.