Business income is generally defined as net income (net profit or loss) plus normal continuing operating expenses. Additional expenses are generally defined as expenses that are reasonably and necessary incurred to avoid or minimize the period in which the company cannot operate. This coverage reimburses a business owner for lost profits and fixed expenses during the time the business is closed. It applies while facilities are being restored due to damage caused by an event, such as a fire.
Business income insurance can also cover financial losses that occur if civil authorities limit customers' access to their neighborhood or business after a disaster. We strongly recommend that all companies purchase this coverage. At the end of the period, the insured person submits the statement of actual business income and the premium is recalculated and a return premium is awarded. Business income coinsurance is time-based, so the insured must base the limits on the consecutive months that generate the highest income.
While there is coverage for the expenses needed to reduce the loss of business revenue, there is no coverage for the additional expenses that are incurred simply to continue operating. Business income with additional expenses covers the loss of income that a business suffers after direct damage to covered property. The monthly compensation limit suspends coinsurance and will pay the company's revenues for 3, 4 or 6 months, depending on the selection made. The insured must then have a limit of at least 50 percent of the 12-month anticipated business income.
If it is determined that an ordinance or law is needed to cover the company's building and personal property, then this form must be purchased due to the increase in the time needed for the building to comply with the code. Because the interruption of electricity, water and communications can prevent certain businesses from operating, this cause of loss is necessary. Business income coverage (BIC) is commercial property insurance that covers the loss of income suffered by a company when damage to its facilities caused by a cause of covered loss causes a slowdown or suspension of its operations. This unusual percentage is used to encourage the insured to cover not only the company's revenues, but also the additional expenses that they must incur beyond the loss of business income.
In addition, the additional expenses incurred by the insured person to remain in operation beyond the amount needed to reduce the company's revenues are also covered. This coverage should be considered if commercial revenues would never be generated, but it could entail a significant additional expense to ensure that the operation can be opened, under any circumstances. The business revenue form does not cover any delays due to legal or regulatory considerations. The maximum compensation period suspends coinsurance and will pay the company's revenues for 120 days after the date of the loss.
Business income is not required to be purchased at the insured's premises to purchase business income from dependent properties. The agreed value suspends coinsurance, but requires the insured to submit signed annual statements showing business revenues for the previous 12 months and anticipated business revenues for the 12 months.
