Owning your own business can be a rewarding experience. There are many perks to being your own boss, but there are also many responsibilities. Your employees, your customers, and your vendors all rely on you to keep your business operational. Let’s say your manufacturing business suffers a fire. Your building and its contents are a total loss. Without a building, your employees are unable to return to work. Without your employees, sales orders go unfulfilled. When they don’t receive their orders, customers resort to taking their business elsewhere. While it may only take a few months to rebuild or establish your business elsewhere, the loss of income during that time could take months or even years to recoup. This is where Business Income Coverage becomes critically important to a business owner. First, let’s define Business Income Coverage. Business Income Coverage covers the business income lost when your business operations are suspended due to a direct physical loss of property on your premises resulting from a covered cause of loss.
Unless all three of these requirements are met, Business Income coverage will not apply. Business Income Coverage is sometimes called Time Element Coverage because it provides coverage for loss of business income over a specific time span called the Period of Restoration. The Period of Restoration begins 72 hours after the loss, and ends when either the business is rebuilt or resumes at another location. For example, we noted earlier your business has suffered a fire. It happens on a Saturday afternoon and causes extensive damage.
However, you are able gather enough stock to reopen your business at another temporary location on Monday. Because it has not yet been 72 hours since your loss, you have not yet entered the Period of Restoration, so you would not be covered for any income lost on Saturday and Sunday. There are two types of Business Income Coverage: with extra expense and without extra expense. Business income with extra expense coverage helps pay for extra expenses you incur to keep your business operational after a loss caused by a covered peril. This coverage kicks in immediately after the loss occurs and can cover expenses such as moving costs, renting temporary premises, and renting or purchasing temporary equipment that does not replace equipment which is already part of your inventory. So in our fire example, while you would not recover the lost income from Saturday and Sunday, you would be reimbursed for the moving expenses because they will allow you to be operational while you rebuild your business. The second type of Business Income coverage -without extra expense – does not include coverage for extra expenses incurred to keep your business operational after the loss, leaving you to cover those expenses.
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For businesses that require more specialized coverage options, there are several coverage add-ons available to help meet your needs. These include changing the period of restoration, extending the length of time you can receive benefits from the Business Income policy (called the Period of Indemnity), or limiting or excluding payroll expense of your employees. Sometimes, a business may suffer an income loss involving a unique set of circumstances that are excluded on the Business Income policy. Endorsements are available to help you address situations such as a delay in rebuilding due to an ordinance or law, or a disruption in utility services. Your independent insurance agent can help you determine which coverages are right for you. Contact them today and get the best business insurance coverage protection to help your business recover after a loss. .