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Home > Blog > Business Income Insurance Explained
MONDAY, MAY 4, 2020

Business Income Insurance Explained

How important is business income insurance? Do you need it? Is extra expense coverage necessary? I would argue the answer to these questions is business income insurance is very important and absolutely necessary for every business owner. Consider what might happen if a fire damages your building, the roof collapsed, or a storm or tornado blew out all the windows. In each case, you would be forced to close your business while repairs are being made.

Your clients would be forced to go elsewhere and your staff may be forced to find other employment. During this period of closure, how will you pay your bills without any income? After all, mortgage payments, rents, car loans, taxes, and yes, insurance bills don’t go away just because you closed the doors.

With business income insurance including extra expense, when you suffer insured damage to your business that cause “a necessary suspension in operations,” this insurance will continue to pay your salaries so that you won’t lose your staff. It will also pay for the extra expense of renting a temporary location so you won’t have to close. The insurance will also reimburse you for your lost profit while your business is being repaired. You really can’t afford to be without this coverage.

There are some limitations and exclusions that apply so you should review your policy carefully and ask for an explanation of anything you don’t understand. Not all insurance policies were created equal. Most importantly, you should evaluate the limit of liability shown in the proposal for business income insurance including extra expense. Is it enough? You’ll find a worksheet in our next post that will help you accomplish this!

Written by Robbie Korth

If you have any questions, please feel free to contact Robbie Korth at rkorth@parkassociates.com.

Posted 12:00 PM

Tags: business income property insurance
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1 Comments

Stephen Sarasohn said...
I agree that business interruption insurance and extra expense coverage are both very important. Just to clarify a point, coverage is triggered by property damage at your premises caused by a covered peril. However, the actual damage doesnt have to be covered by your policy. That is to say, the property need not be your property. It only needs to be on your premises and damaged by a peril covered by your policy. Business interruption insurance also covers a loss triggered by "civil authority". That means that the government has prevented you from operating your business because of property damage not on your premises. The property damage must be caused by a peril your policy covers.
FRIDAY, MAY 15 2020 1:46 PM

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