News

Business Income Coverages May be One of the Most Vital Coverages You Sell to Your Client

Business income coverage is one of the most significant coverages your client needs to stay in business.  Think about it, their business exists to make money- money to pay their staff, pay their rent or mortgage, supplies, taxes, utilities, and then hopefully profit. If their business were to be shut down due to a loss, how will they continue to pay their staff, their rent or mortgage, supplies, taxes, utilities, etc? The bills will continue to come in. If there is no protection of their income, the money will not. 
There is an additional premium to cover business income. However, your client needs to see this not as an expense, but as an investment in the interest of continuing the viability of their company. In reality, the cost of the additional coverage is relatively small considering the protection to adequately protect your client’s financial well-being. 

If your client’s business is forced to shut down quickly due to a covered loss, business income coverage will: 

• Replace Net Income- Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred; and continuing normal operating expenses incurred, including payroll.
• Pay for continuing expenses such as mortgage, advertising, taxes, and payroll
• If they also elect the extra expense option, they will also have coverage to pay for relocation expenses and advertising fees if they set up shop at a temporary location.

Here are a few claims examples in which business income comes into play. 

• An apartment tenant left a candle burning at the insured’s premises, starting a fire. The fire caused $65,000 in building damage. In order to repair the damage, the apartment had to be evacuated for two months, resulting in $15,000 loss of rental income for the insured.
• An insured owned a dog-grooming shop that catered to area residents. One night severe rainstorms with lightning came through the area. During the storm, lightning hit the building and traveled through the electrical system severely damaging it. A large portion of the electrical system needed to be replaced at a cost of $30,000. The insured also had to close his business for 5 days until repairs could be made. During the 5 days the business was closed the insured lost $4,500 of business income.
• An insured ran a small grocery store in a building he had purchased a few years prior. A heavy rainstorm with strong winds passed through the area. During the storm, large tree branches with leaves fell onto the roof of the building. The leaves and branches clogged the gutter and drains on the roof causing water to back up and then enter the insured’s grocery store. The water damage shorted out all of the refrigeration equipment in the store. Due to the damage, the grocery store could not sell perishable goods until the refrigeration equipment could be repaired. The repairs took ten days to complete at a cost of $11,000.During this time the insured also lost $8,000 of business income and suffered a spoliation loss of $4,500.