The main purpose of Business Income coverage is for business continuity. It provides funds to pay for continuing expenses that remain even though the business is not operational at the moment due to a covered loss. These are deemed necessary expenses to keep the business viable for it’s return. One example would be key staff, such as an executive chef. You wouldn’t want to lose their talents so their compensation remains even though the kitchen is inoperable. There are very specific loss formulas and calculation variables that are used by insurance carriers contained in your policy that determines the amounts.
Business Income coverage:
Standard Business Income Insurance – Intended to compensate the insured for income lost during the period of restoration. Continues until the operations and or facilities are brought back on line and are fully functional.
Extended Business Income – Provides additional coverage that increases the standard business interruption coverage for a specific period of time once the facility or operation has been brought back online. An example of which might be a restaurant that re-opens after 6 months of restoration. It may take additional time for the general public to come back, which means their sales will be off until word gets out they are back. Extended Business Interruption would help bridge that sales gap.
If your business might suffer a loss from a time element perspective, contingent supplier, or a key anchor tenant, you should consider these enhancements.