Do you have business income coverage included on your insurance policy? Do you know what the coverage is for, or how it works? These are great questions that you should ask yourself as a business owner.
Business income, also known as business interruption, is a coverage form that will be included on your commercial property policy. This coverage provides you protection for a loss of income to your business when there has been a covered, direct physical loss to your premises such as fire, natural disaster, or vandalism that slows down or suspends your normal operations. Typically, the coverage will apply during the time that is required to repair or replace the damaged property, known as the restoration period.
The business income coverage will usually have a time limit, normally 30 days but can sometimes be extended for an additional cost. The coverage form can vary, depending on the carrier but there are some standard coverages within the form. The most common expenses that could be covered would be the following:
- Mortgage and/or rent payments
- Employee payroll and/or wages
- Loss of net income and/or profit
- Loan payments
- Tax payments
You will want to talk to your agent and ask about additional coverages that could be added with a rider. Keep in mind, as with most all insurance, the coverage form will also include some exclusions. For example, acts of war, nuclear hazards, flood, epidemics/disease/viruses and more. Some will also include a co-insurance clause which will impose a penalty if the limit chosen is less than the required amount needed.
Now that you know what the coverage provides, you will need to be able to calculate the amount of coverage you need. The most the insurance carrier will pay for the loss is the limit you choose for the business income coverage, so it’s important to make sure you select an adequate limit. An accurate way for you to project the limit is to consider how much income your business generated in the past 12 months, then you can estimate your future 12 month income based on your expectations in the next year. You will want to use a business income worksheet to help aid you in your calculations. Sometimes people find the worksheets perplexing, if this is the case make sure to ask your accountant to help or complete it for you!
As always, if you have questions or concerns about this type of coverage or any other insurance questions reach out to your agent or feel free to call Sanger Insurance. We love to help in any way we can, with our current clients or anyone just needing guidance with their insurance needs. If you are located in the North Texas areas such as Sanger, Krum, Pilot Point, Valley View, give Sanger Insurance a call and let us gain your trust and business.