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    Business Income Coverage

    Several insurance policies for business owners provide protection during unforeseen events like natural disasters and calamities. For example, business income coverage covers income loss in crises where you have to halt business operations. However, where does the covered cause of loss stop?

    While interruption policies compensate for the loss of business income during the period of restoration, you need to meet specific criteria for your insurer to approve your claim. Not all claims make it past the initial screening. Having a good understanding of business income insurance coverage will help your draw and actualize a stable, effective continuity strategy to avoid extreme losses.

    What Does a Business Income Policy Cover?

    Yes, insurance can help you cover lost income, execute business continuity, and avoid having to file for bankruptcy—but only if you understand your business income coverage. Contrary to what some might assume, policies like these do not automatically give the policy owner money during crises. You will have to undergo the necessary processes to claim compensation.

    Unfortunately, those who do not understand even the basics of these policies might find themselves lost. In a worst-case scenario, you might not even get a single penny for your operating expenses. To ensure that you utilize your policy to the fullest, we encourage familiarizing yourself with what standard coverage entails and how you can cover these lapses with riders.

    What Triggers Business Income Insurance?

    The loss of income resulting from property damage triggers most business income coverage policies. If no part of your commercial property was damaged by a covered event, you will not receive assistance for operating expenses or lost income.

    Unfortunately, this means that the loss of income stemming from the recent COVID-19 pandemic is not covered by most standard policies. In fact, most claims for interruption due to the past year's quarantine protocols were not successful.

    Although, you could get coverage for the past year if your policy has a dependent property endorsement. This rider indicates that your business can get coverage for the interruption caused by the absence of your major suppliers, primary customers, manufacturing location for product development, or company drivers.

    What Does Business Income and Extra Expense Cover?

    Extra expense insurance and business income coverage include compensation for your:

    Lost Income

    Business income coverage can compensate for your total lost income during the indemnity period—your insurer will base the amount off of previously submitted financial records.

    Due Loan Payments

    You can seek help if your business still has loans and monthly amortization to pay off during the indemnity period. Although, you cannot using business income coverage to pay off unpaid dues prior to the indemnity period.

    Mortgage or Rent

    Similar to your loan payments, insurance will only cover dues falling under the indemnity period. You cannot use it to cover any outstanding balance with your landlord.

    Taxes

    Your provider can provide assistance if the indemnity period overlaps with the end of the tax year.

    Employee Payroll

    Combine this with worker's compensation insurance policies to ensure that your employees are covered no matter what unforeseen events transpire.

    Who Needs Business Income Coverage?

    The Insurance Information Institute (III) states that standard business income coverage best suits small- to medium-sized businesses generating less than $5 million in revenue annually or consisting of no more than 100 employees.

    Larger companies that carry significant risk may have to purchase their coverage through separate policies if they do not qualify for the standard business income insurance. They can also boost their commercial property insurance with riders. For example, extra expense coverage covers a significant loss of business income during the period of restoration following specific calamities.

    How Do You Handle a Business Interruption Claim?

    Post-crisis damage mitigation and business continuity come with a great deal of stress. You need to follow a streamlined, efficient plan to utilize the full benefits of your business income coverage. These situations leave no room for mishaps.

    Step 1: Assess the Situation

    Do a quick assessment to get a firm grasp of the situation. Gauge the total damage to your property and identify the natural disaster or accident that caused it. You need this information to file an insurance claim.

    Step 2: Review Your Insurance Coverage

    Clarify the amount you are eligible to claim from your insurance plan versus your lost income and property damage. You cannot claim more than your total coverage value.

    Step 3: Gauge the Indemnity Period

    Identify the indemnity period, then gauge how long you will need to restore regular business operations. Bear in mind that you will typically have to wait two to three days before insurance can help, so you might have to get your continuity funds from other sources until then.

    Also, the period of restoration usually lasts no more than one month. However, you might be able to stretch this limit up to a maximum of one year if your business income policy has the necessary riders and endorsements. Although, applicants can only purchase most of these add-ons upon insurance application.

    Where Can I Get Business Income Insurance?

    What insurance can help your business during a crisis? To help you sort through dozens of the largest insurance companies in the country today, we have narrowed down the list to the top three options that provide the best, most extensive business income insurance coverage:

    Most Extensive Coverage: Farmers Insurance

    • Established in 1928
    • Available in 48 states, except Alaska and Hawaii
    • A unique set of add-ons through "endorsements"

    Farmers Insurance offers a pretty standard business insurance policy coverage. However, they take the number one spot on our list for their extensive business income coverage add-ons called endorsements.

    These consist of 20 different options, which have various practical, real-life applications. For example, retail businesses can sign up for endorsements that cover the costs to repair their outdoor signage or equipment if they break down.

    Broad Coverage of Events: Nationwide

    • Established in 1926
    • Available in 48 states, except Alaska and Hawaii
    • Offers a broad spectrum of covered events

    Nationwide offers well-rounded business income coverage options that would yield several benefits to a broader range of business owners. Apart from the standard general liability, business income, and commercial property insurance coverage from natural disasters, they also offer equipment breakdown coverage. You can file claims for business income loss if your machinery malfunctions.

    They also cover more accidents and calamities than most insurers do. In fact, a business income insurance policy from Nationwide provides coverage for property damage stemming from unforeseen events like fire, hail, strong winds, vandalism, and even aircraft or vehicular accidents.

    Ideal Coverage for Professional Service Providers: Traveler

    • Established in 1864
    • Available in all 50 states
    • Unique BIEE coverage for professionals

    Traveler offers extra (BIEE), which covers the period of restoration following the loss of physical and digital data. You can combine these with cyber insurance plans for added protection against data breaches. After all, with cyberattacks occurring every 39 seconds, keeping your business safe through insurance would drastically improve the feasibility of your continuity strategies.

    Business income insurance policy owners from Traveler also have the option to elect dependent property coverage. This clause protects you from business income loss stemming from disrupted operations with a crucial supplier.

    Assured Standard has multiple resources explaining business insurance. If you find yourself lost on what policies to get, check out our quick guide on the eligibility of a business owner's policy.

    Frequently Asked Questions

    What is the business income limit?

    The most your insurer will pay for a loss is the business income limit of insurance. To figure out this number, you estimate future revenue and how long it'll take to fix up any damaged property after a physical loss in case one were ever to happen.

    How do you determine business income limit?

    Your net income will be the amount of money left over after you have calculated your business's taxes. Subtracting out expenses and operating costs from revenue will give you your business' final net profit.

    What is included in business income?

    Business income can include revenue from the sale of products or services. Fees received by a person from their regular professional practice are business-related revenues; rent collected in a real-estate related field would be considered as well.

    Is business interruption insurance mandatory?

    Business interruption insurance is not a legal requirement for any business. However, that doesn't mean you shouldn't be prepared. Insurance experts recommend looking at the risks your company encounters in order to determine the kind of insurance protection you need.

    How do I get business interruption insurance?

    Small businesses will often purchase business interruption coverage by purchasing a business owner's policy (BOP), which bundles property and liability policies with the option of adding on an additional policy.

    Business income coverage varies on a case-by-case basis. Insurers allow business owners to customize their policies based on the add-ons they choose to elect. For example, business insurance does not usually cover physical loss or damage due to flooding. However, you can pay an extra premium to get coverage for this type of natural disaster.

    Signing up for other insurance policies also helps cover the lapses in your business interruption coverage. Generally, you can maximize protection by having several active policies like commercial property insurance, extra expense coverage, and cybercrime insurance, along with your existing business income insurance.

    Assured Standard compares the best insurers in the country. If you have plans of getting business income insurance soon, we strongly advise going through our list of recommendations beforehand.

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