Business Income Insurance
Business income coverage (BIC) protects against loss of income or profits in the event that a business suffers property loss or damage from a covered peril, such as fire, natural disaster, theft, or vandalism. BIC is also known as business interruption coverage and is not sold as a separate policy but rather as part of a property/casualty policy or a comprehensive package policy.
Business income coverage extends through the period between when a business shuts down to when the equipment that suffered damage to cause loss is repaired or replaced. In most cases, this means that the revenue or income loss that a business is likely to experience during an un-operational period is covered. Most property policies will not cover all of this revenue or income.
Business income coverage also covers operating expenses that continue even though operations are temporality halted. If a business spends money above and beyond normal operating expenses to decrease interruption costs, extra expense insurance is available to reimburse a company for that money. It helps the business avoid having to shut down during a restoration period. In some cases, extra expense insurance is enough, and BIC isn’t even necessary.
There is also contingent business interruption (CBI), which is designed to cover an insured’s business income loss resulting from loss, damage, or destruction of property owned by others, including direct suppliers of goods or services. Direct receivers are included in this coverage as well. CBI provides coverage for the direct relationship between an insured’s suppliers and receivers, which can create a gap in coverage for insured’s that are involved in multi-tiered supply chains. For this reason and others, it is wise to speak with a licensed agent before making business income coverage purchase decisions.
The price of a policy is related to risk that a business faces. It’s important to consider and review these risks with an agent before purchasing BIC. Review the following with an agent:
- Review carrier forms and the specific type of BIC necessary for the business type being insured.
- Understand that business operations must resume as soon as possible, otherwise coverage can be denied. Usually there is a 48-hour waiting period before BIC kicks in.
Business operation characteristics that can play a role in a BIC policy include:
- The ease of moving business operations to another location, if necessary.
- The presence of operation bottlenecks where small physical losses can lead to the operation shutting down and larger loss.
- How a loss will affect a business’s income stream.
- How vulnerable a business is to an interruption.
All of the above are basic business income coverage options. Additional coverage options can be customized based on individual company needs. To discuss the coverages that would be appropriate for your organization, please contact Century Insurance today.