Business Income / Extra Expense Insurance
Business income or also known or referred to as business interruption reimburses your business for revenues you lose during a downtime caused by damage to or loss of your business property. This coverage is as vital to your businesses survival as fire or wind insurance. The cost for the coverage will be directly linked to the risk of a fire or another disaster damaging your company's premises. Businesses that are more mobile by being able to continue with their own operations at a temporary location will pay less than a business who would not be able to do this. A good example of this would be a real estate's office.
Most owners in business would never consider opening the doors without buying insurance to cover damage due to fire and windstorms, but too fail to consider how they would manage if a fire or other disaster damaging their business premises so they were temporarily out-of-business. The coverage is added to a property insurance policy or included in a package (BOP) policy. It can not be sold on a separate insurance policy.
Business interruption insurance takes into consideration the profits your company would have earned by basing this on your company's prior financial records before the disaster occurred. It is important your policy limits are sufficient to enough to cover your company for more than a few days. A major catastrophic event could cause your company to be off track for several months as your customer may have gone to other competitors during this time taking more time to regain these same customers back again to your business. There can also be a waiting period before your business interruption coverage will start.
Extra expense insurance goes right along with business interruption because it reimburses your company for expenses incurred to avoid or minimize the suspension of your business. As an example your building roof collapses after a heavy storm, the business income policy pays for the income you loss while you cannot occupy your building, whereas the extra expense policy covers the rent for a temporary office space while your building is being repaired. In most cases, extra expenses will be paid if it will help to decrease business interruption costs. Sometimes it is possible for extra expense insurance alone may provide sufficient coverage without the business interruption insurance.
Special Note: This summary outlines in general terms the coverages afforded under some policies. Examine the policy carefully for any exclusions, limitations, or any other terms or conditions that may specifically affect coverage. The terms and conditions of the policy prevail.