Business Income Insurance – The missing piece for your insurance protection
80% of businesses that have to close for more than 6 months, never reopen.
Why? Because they have insufficient business income insurance or no business income insurance at all. Don’t allow your business to become part of this statistic!
When reviewing your business insurance plan, examining your business income insurance coverage is crucial to the business surviving after a loss.
What is business income insurance?
Business income is meant to replace your net income and continuing operating expenses after a covered loss. Imagine that there is a fire in your business. You are closed for months, how do you continue to pay your rent, the loan payment, the salary of your key employees? Most businesses don’t have this type of money in the bank, which is why there is such a need for this protection.
Business income can be done a number of ways, it can be done based on coinsurance, a monthly limitation, Actual loss sustained for a period of time. It is important that the calculation that you use is best suited for your type of business. Actual loss sustained for 12 months, is really easy to calculate to apply for coverage but not all businesses can reopen in a period of 12 months so it is not always the best option, and not all carriers offer this option.
In addition to the business income you can usually add rental income, or extra expense insurance coverage
Extra expense coverage covers the expenses to bring the business up and running during reconstruction. For example, if you could rent a building down the block to run the business out of, which reduces the loss of business income the insurance company would have to pay. The extra expenses associated with getting the new location up and running, new phone lines, paying additional rent, etc., would be paid by the insurance company.
Business income is crucial to the survival of your business. You may need to use business income insurance for even a temporary shutdown. For example, if a pipe breaks in the building and the water damage causes you not to be open for 3 weeks. Think about it, how will you make payroll, pay the rent with no income for three weeks? How many customers could you lose during that time who need to find an alternative provider?
When thinking about business income it is important that you also think about your disaster plan. What backup do you have in place, do employees have the ability to work from home to keep the business going? Do you have a friend in the industry that would let you work out of their business temporarily so you can continue to fill orders?
A comprehensive business insurance plan should include at least the following:
- Business income insurance
- Commercial property insurance
- General liability insurance
- Workers compensation insurance
- Business auto insurance
- Employment practices liability insurance (EPLI)
- Cyber/data breach insurance
Depending on your particular business, there may be a few more types of business insurance that you may need.
What limit of insurance would you need?
Your business income is something that you need to spend some time on calculating. We have a business income worksheet that we would be happy to share with you to help you calculate your appropriate limit for business income insurance.
Generally, we see businesses not having enough coverage rather than too much coverage.
Don’t lie to yourself thinking that this could never happen to you, instead discuss with us your business and your net income and continuing expenses that you need to cover to insure that your business comes back after a loss.
Remember, that your business, and your lifestyle, depends on business’s income.
Huff Insurance is a Maryland Trusted Choice Independent Insurance Agency. We love, respect, and protect our clients and our community. We have been doing so since 1960.
If you have any questions on business income insurance, or any other for that matter, feel free to give us a call at 410-647-1111.