Within your business property insurance policy, you likely have coverage for lost income occurring from the suspension of your normal business operation due to a covered incident. Many people don’t realize that when business property is lost, it typically takes six months to a year for small businesses to return to previous income and production levels.
Prior to an emergency, it is essential to understand your specific coverage and limits to that coverage to ensure you have the protection you will require to rebuild and recover.
Understanding the Business Income Insurance Clause
Business income insurance, also known as business interruption insurance, will generally pay for the actual loss of business income sustained during a necessary suspension of operations during a period of restoration following a covered loss. However, unless you are an expert, it can be difficult to decipher the meaning of the clause.
Here are some essential terms to help:
- Actual Loss – The insurer is only obligated to pay the benefit if the business actually experiences a closure and loss of income. Further, the amount of the benefit is based upon the actual dollar amount that is lost.
- Business Income – The benefit paid by the insurer is based upon loss or reduction in the business’s net income that has occurred as a result in the suspension of operation.
- Period of Restoration – Up to the policy limits, the calculation of business income is also based upon the length of time it takes for the business to rebuild, repair, or replace the damaged property in order to resume business operations, within a reasonable timeframe. This period begins on the date that the damage occurred and ends when the restoration is complete, but policies can vary on their definition of a reasonable timeframe for coverage. It is important to understand your policy’s limits.
Talk With The Experts
No two businesses are exactly alike, and it takes a full understanding of your business and your insurance options to develop the right coverage for your company. Let us develop a comprehensive insurance plan that addresses all of your needs. You can call us directly at (877) 215-5431 or email us for more information.
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