In my last post, I gave a high-level overview of what business income insurance is and why you, as a business owner, need this coverage. While Covid-19 has led to a lot of questions surrounding this coverage, the fact remains this is the only insurance coverage that will cover your risk of lost profit due to an insured loss affecting your ability to conduct business in a normal fashion.
To assist you in evaluating how much is truly at risk, I have included the worksheet our agency uses to help clients understand what is at risk and how much insurance to carry. Please use the below as a resource to better understand your business income exposure.
BUSINESS INCOME WORKSHEET
Monthly mortgage payment or rent (1) $______________
Monthly real estate tax expense (annual tax/12) $______________
Monthly vehicle loan or lease payments $______________
Monthly business loan payments $______________
Monthly insurance costs (annual cost/12) $______________
Monthly legal and accounting fees (annual costs/12) $______________
Monthly payroll and fees (annual costs/12) $______________
Monthly payroll including benefits (2) $______________
Monthly utility expenses (3) $______________
Monthly profit $______________
Number of months needed to move to a permanent new location or to rebuild your current location. Three months should be considered a minimum, six months is closer
to normal, and twelve months would be unusual. ______MONTHS
Limit of liability needed (TOTAL $ x NUMBER OF MONTHS) $______________
I. It’s usually best to show your full monthly rental expense on this line. Most leases permit you to stop paying rent only if the building is totally destroyed or if the period of untenantability is six months or greater.
II. On this line, include owner’s salaries if the owner normally is paid a salary.
III. Although water, heat, electricity, gas, telephone and trash hauling would be reduced or eliminated during a period when you are closed, you would still have some minimum expenses in these areas. A good estimate would be to show one-half of your normal expenses on this line.
EXTRA EXPENSES WORKSHEET
Estimate the monthly cost of operating your day care center from a temporary location while your building is closed for repairs.
Monthly rent – temporary premises $_____________
Monthly utilities – temporary premises $_____________
Monthly – furniture and equipment $_____________
Monthly extra transportation expenses $_____________
Monthly extra advertising costs $_____________
Monthly maintenance – temporary premises $_____________
Monthly unforeseen extra expenses $_____________
Number of months needed to move to a permanent new location or to rebuild your current location. Three months should be considered a minimum, six months is closer to normal, and twelve months would be unusual. _____MONTHS
Limit of liability needed (TOTAL $ x NUMBER OF MONTHS) $_____________
Written by Robbie Korth
If you have any questions, please feel free to contact Robbie Korth at firstname.lastname@example.org.