Commercial Income Insurance

The COVID-19 pandemic introduced business disruptions that have not been seen in our lifetime. Less dramatic small business disruptions can be caused by personal emergencies, management team disputes, or funding challenges. Do you have a plan in case you need to temporarily suspend business? This scenario often creates loss of business income and increases operating expenses. Today, we’re introducing you to a few coverages that can help maintain business stability amid a covered shut down.

The Basics of Business Income Insurance:

Often called Business Interruption Insurance, this commercial coverage helps pay for lost income and certain continued expenses during a business shut down related to one of these damaging events:

• • Fire
  • Theft
  • Certain Natural Events
  • Fallen objects

It’s always wise to verify with your policy language, but in general, if business doors are shut down (in other words your business is without phone, connectivity, or water for more than a day) Business Income Insurance kicks in to cover necessities like payroll, taxes, mortgage/rent, and fees associated with relocation (to name a few).

Most times this coverage is an Endorsement, or a modification purchased to personalize and legally amend your Business Owners Policy (BOP).

Not only a fun acronym, a BOP is also a great way to cover physical business property damage. It combines general liability and property insurance into a single policy, both of which are key components to a strong insurance policy. Business Income Insurance takes a BOP to the next level, as it goes beyond the physical, covers lost revenue, and enables you to sustain customer and employee relationships even when doors are closed.

What Business Income Insurance Does Not Cover:

With all insurance, it’s important to have the appropriate coverage expectations. Business Income Insurance will not cover:

• • Personal injuries or illnesses that prevent you from running your business.
  • Property damage (for this you will need physical property coverage included in your BOP).
  • Pandemics (yes, even COVID-19).
  • Natural disasters like earthquakes, floods, and mudslides (if your business operates in a geographical area that faces these risks, your insurance advisor will often include these in a different policy).
  • Operations like marketing, development, or insurance.

Other Income Related Endorsements to Consider:

While your strategizing your back up plan, these Endorsements can prove very helpful:

Dependent Property Coverage: If your business relies on third parties to deliver, supply, or even refer customers to your goods/services, you could be at a major loss if these businesses are shut down. Some supplier coverage may already exist in your Business Income Insurance, but Dependent Property Coverage will broaden your protection. Not only does this protect you and your customers, especially if they have already paid for your services/products, but it also addresses contingent exposures that can result in income decline.

Extended Business Income: Sometimes a pause in operation may make it difficult to get back to your prior income level. A helpful question to ask yourself is how long it will take your business to bounce back after a covered loss? Extended Business Income may help replace lost revenue while you’re building your business back to normal flow.

Generally, if your business has physical property and equipment, works with 3^rd party businesses, or operates on a constant basis, these coverages are wise to have in your commercial insurance portfolio. Of course, the cost of these coverages will always reflect the number of employees, your industry, and environmental risks. However, at the end of the day, your business, operations, and risks are unique, so a qualified insurance advisor should be able to tell you exactly which income related coverages are practical in your situation. Reach out today for your no cost risk management assessment.

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