Is Your Business Properly Insured for Income Loss?
Running a business in California is stressful enough and making sure you have an adequate amount of business insurance to cover business income loss may lessen some of the anxiety. Any kind of loss or liability will only add to the challenge. Your comprehensive insurance policy should include coverage for just such an occasion. This is called Business Income with Extra Expense coverage.
The Business Income portion of coverage will provide the amount of income you would have made had you not had a loss. The Extra Expense portion of coverage will provide a limit of insurance for new or additional expenses due to the incident loss.
A typical policy in California says that the amount of Business Income loss will be determined based on the net income of the business before the direct physical loss or damage occurred; the likely net income of the business if no loss or damage occurred; the operating expenses necessary to resume operations with the same quality of service that existed before the loss or damage; and other relevant sources of information.
In typical California policy says that the amount of Extra Expense will be determined based on all expenses that exceed the normal operating expenses that would have been incurred by operations during the period of restoration if no direct physical loss or damage had occurred (deductions will be made for the salvage value that remains on any property bought for temporary use during the period of restoration, once operations are resumed, and any extra expense that is paid for by other insurance, except for insurance that is written subject to the same plan, terms, conditions and provisions as this insurance); and all necessary expenses that reduce the Business Income loss that otherwise would have been incurred.
These are important areas of discussion to have with your agent in close review of you personal overhead as well as your business. Your financial statements are an essential tool in this as well. Do you want to provide for the cost to pay and maintain key employees? What are your your family needs when the business has no income? Consider the time framed and dollars amounts in which to plan for this coverage.