Consider this scenario: The business next to yours catches fire, and it quickly spreads to your insured commercial building. The fire is extinguished, but your building is damaged and uninhabitable for several months. In addition, much of your merchandise is destroyed. How will you replace your earnings under these circumstances?
Business income insurance can help replace your income after a covered loss and can be purchased with your property coverage. When endorsed on your property policy, coverage is triggered by a covered event such as a fire. Most carriers do not cover events such as an emergency evacuation or civil disobedience, although this can be added by endorsement.
When triggered, business income coverage protects your lost earnings, defined as revenues minus ongoing expenses. This means you won’t be fully reimbursed for expenses such as utilities at your temporary location, because these are ongoing expenses in your permanent location. Pre-loss earnings are the basis for reimbursement under business income coverage.
There are several factors to consider when purchasing this coverage, including how long it would take for your business to become fully functional after a serious event and whether comparable space in your area is readily available. If you rent, consider whether your business is adequately protected – as it should be for you to obtain business income coverage.
It’s easy to add business income coverage to commercial property coverage, and you’ll get peace of mind knowing you’ll be protected if a covered loss leaves your building temporarily or permanently uninhabitable.