Property Insurance: Business Income Coverage

Property Insurance: Business Income Coverage

by Andy Shafer

“Business income coverage (BIC) form is a type of property insurance, which covers a company’s loss of income due to a slowdown or temporary suspension of normal operations, which stem from damage to its physical property. 

Coverage typically includes the loss of income but can exclude some ordinary operating expenses, such as utilities. Usually, coverage applies during the time required to repair or replace damaged property. However, for additional premiums, the term could be extended to cover a specified number of days after the completion of repairs.”*

There are basically two different ways to choose your business income coverage.

The first way is the most common: having a set limit for your business income. That version of coverage has an established cap on how much of that limit can be paid each month. Business income coverage will be in place until the limit is exhausted.

The second most common form of business income coverage is on an “actual loss sustained” basis. Meaning, theoretically, you have no cap to your business income coverage. However, you only have business income for a period of twelve months.

In choosing which coverage to get, the most important point to consider would be whether or not your operation could get back up and running within twelve months. You need to evaluate your operation, supply chain, and geographic location to help determine the answer to that question. For instance, if you’re a manufacturing firm in a municipality with strict building codes, it may take you longer to obtain the permits and get through the red tape. Whereas if you operated in a more rural area, you may have a little more flexibility on those items. Another example would be if you are a retail store in a strip mall, with fluctuating sales figures, you could have a different exposure than if your business was a standalone building. These are things you need to consider when crafting your business income coverage.

With established knowledge in business income coverage, we have formulas that can assist your business in determining which direction to choose. E-mail us today, and we will calculate those figures to make sure your business is properly covered.

*What Is Business Income Coverage Form? – Investopedia