Too many people purchase insurance as if a loss will never happen to them. The truth is that insurance should be purchased as if a loss will absolutely happen.


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.


Yes, most of the contracts you sign will have insurance provisions that often include business income coverage requirements.


All insurance policies have coverage exclusions. Here are a few things that business income insurance does not cover:

  • Loss of income without insured damage from a covered cause of loss to insured property at an insured location
  • Financial failure unless caused by an insured event
  • Loss due to a supplier (or major customer) going down unless specifically insured
  • Loss due to the economy
  • Costs associated with product recall unless specifically insured


Actual Loss Sustained
With "actual loss sustained" coverage, losses are not subject to a limit of insurance. Instead, the policy pays for loss sustained during a restoration period not to exceed 12-months. Coinsurance does not apply. Businesses where restoration may exceed 12 months should consider an alternate business income coverage form.

Coinsurance is used to make sure that an adequate limit of insurance is carried for the business income exposure. A coinsurance penalty applies only if the limit insured is inadequate at the time of the loss. The penalty formula is "Limit carried/Limit Required x Loss". Coinsurance may not be suitable for smaller risks.

Coverage Options
All business income policy forms are not alike. Some list a limit while others are unlimited. Some limit the time period over which benefits will be paid (i.e. 120 days, 12 months, etc.). Others limit coverage by month, a maximum payable in each period of 30 consecutive days. Consult your insurance professional before placing this coverage.

Include all operating expenses listed on the business' income statement or federal tax return. We recommend including all because it is difficult to determine which expenses will continue until the time of a loss. Some expenses may not continue at the full amount while other expenses may continue but at a temporary location. Therefore this calculator includes all operating expenses.

Extra Expense
Pays for additional costs in excess of normal operating expenses that an organization incurs to continue operations while its property is being repaired or replaced after having been damaged by a covered cause of loss. Extra expense coverage is often written in conjunction with business income coverage.


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.

Net Income or Loss
This is the profit or loss of the business before taxes. The figure can be found on the business' income statement, profit or loss statement, or federal income tax returns. Use the latest 12-month figure.

Business income covers payroll expenses as a continuing expense unless ordinary payroll is limited or excluded. Ordinary payroll is payroll for employees other than officers, executives, managers or employees under contract. Insuring payroll helps prevent employees from leaving or not getting paid during the recovery period. Also, some labor agreements require payroll and benefits to continue.

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.

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In insurance, “apples for apples” quoting just doesn’t work. You are buying protection against loss to your unique risk exposures. Things change. The insurance you purchased last year most likely will not fully protect you this year.

At VANTREO, we consider ourselves the master architect of your risk reduction and insurance plan. We’re unique because our approach embeds leading technology, backed by live expertise, into everything we do. You become better protected while we work with you to increase the value of your business.

Our clients tell us we make them happier buying insurance! So, how do we initiate a conversation with you?

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