About Business Income Insurance
Business Income, in general, pays for net income (or loss) plus continuing normal operating expenses including payroll in the event of loss resulting from damage to insured property. This calculator uses a bottom-up approach starting with net income and adding continuing expenses which follows what Business Income coverage insures.
A Few Important Considerations
Limit Insured
The limit insured is the maximum amount available to be paid out under the policy. This limit is subject to policy provisions such as waiting periods and coinsurance. Seek professional insurance guidance to help ensure proper protection. Not all business income coverage is subject to a limit. With "actual loss sustained", coverage is limited to actual loss incurred not to exceed 12 months.
Period of Indemnity
The "period of indemnity" is the maximum expected period of recovery in event of total loss (in months). This timeframe is taken into consideration in determining the appropriate coverage limit. Often once operations resume after a loss, it takes time for revenues to reach pre-loss levels. An Extended Period of Indemnity endorsement may be added to extend coverage to take this into consideration.
Waiting Periods
Waiting periods are built into business income forms. This acts as a deductible. Waiting periods apply to business income coverage, not extra expense. Business income loss that occurs during the waiting period, typically the first 24 to 72 hours, is not covered by business income coverage. Some policy forms can be endorsed to remove the waiting period entirely.
Small Steps. Big Protection.
Too many people purchase insurance as if a loss will never happen to them. Truth is that insurance should be purchased as if a loss with absolutely happen..
Information needed to calculate business income/extra expense exposure
1 Net Income (or net loss)
before taxes
2 ALL Expenses including payroll
but excluding Cost of Goods Sold
3 % Expected Growth
for the 12-month period insured
4 Extra Expense
(the anticipated extra costs to operate/move to a temporary location)
5 Maximum expected recovery period
(restoration often takes longer than anticipated)
6 Input from your insurance professional
before placing this coverage