Property Can Be Replaced. Business Income? It’s Complicated.

A fire rips through your music store. Your inventory, customers’ instruments, furniture, lesson rooms – it’s all gone or damaged. You’re devastated, but you discover your business insurance will help replace it all. Thank goodness.

But wait…a property restoration company estimates your space will be repaired…in six months. …Now what? One might argue an income loss could be more detrimental to a business than the property damage itself.

Your insurance policy may include Business Income Coverage (aka: BIC, Business Interruption Coverage). BIC provides coverage for loss of income triggered by a covered property claim (such as fire, theft or a natural disaster destroying your store, studio, shop and/or everything inside).

BIC typically pays the actual loss sustained during the time of repairs/restoration (known as the period of restoration). Okay, that’s great and all, but how in the world do they determine the lost income?! It’s difficult to predict what business would have been like during that period, but a claims adjuster will help. To ease the process, keep accurate records of income and profits, at least down to the quarter. Maintain copies on a hard drive at home in case the records are damaged in the fire. Even better? Have a Business Continuity Plan: a game plan for what to do, where to go and how to get back in business ASAP when the worst hits.

BIC, depending on the policy, may also include Extra Expense Coverage. Think about it. You have no income, but here come the rent, taxes and utility bill due dates. You’re expected to get back to business ASAP so you express ship new inventory in. Maybe you even move into a temporary space that allows you to continue operating on a smaller level while repairs are made. These are all considered “Extra Expenses” and may be covered so long as their end goal is to help resume operations ASAP.

If you have a BOP (Business Owners Policy) or a Commercial Package Policy in place, you probably already have the coverage. If you’re only insuring your property or if you only have liability coverage, BIC may be missing. Consult with your agent, or give your resident Insurance Nerds a call (psst, that’s us!).

Stay tuned for our next post. We’ll dive into some extra BIC detail, such as how insurance might kick in when the power goes out. Can’t wait until then? Check out our BIC vocabulary lesson post in the meantime.