Property Coverage can be modified so the policy protects you, not only for damage to the property itself, but also for “indirect loss”. Business Income Coverage would protect you against lost revenue resulting from the necessary interruption of business caused by loss or damage to your buildings or personal property (except finished stock). The loss or damage must occur by an insured cause of loss at the premises described in your policy. Business Income Coverage pays for loss of or reduction in profits and the continuation of normal expenses to the extent that they would have been earned if your business had remained in operation.

We recommend that you consider Business Income Insurance to protect you against these exposures. Business Income coverage will pay for the actual loss of business income you sustain during the necessary suspension of your operations during the “period of restoration”. The period of restoration begins when the actual loss or damage occurs and ends when the damaged property should be repaired or replaced with reasonable speed and similar quality.

Business Income means:

1. net income (net profit or loss before income taxes) that would have been earned or incurred; and
2. continuing normal operating expenses incurred (including payroll).

Business Income Insurance includes Extra Expense Coverage in the limit of insurance. Extra Expense Insurance pays for the necessary expenses you sustain due to covered physical loss to property at the premises described in the declarations. These expenses are those expenses that are over and above those you normally would have incurred if there had been no direct loss or damage to your property.

The usual Business Income Form insures net profit and continuing expenses when a business is interrupted as the result of covered damage to property at the Insured’s premises.

A business interruption can also result from direct loss or damage to property at a main supplier’s/main customer’s/ or some other non-owned premises that draws customers to your location.

This exposure is referred to as “contingent” business interruption and if the exposure exists for you, insurance is available. For coverage to apply, an insured peril must cause a loss at the contributing (supplier’s) property / the recipient (customer’s) property / the leader’s (anchor store’s) property, but the shutdown (total or partial) must affect your business. For example, a fire might destroy one of your supplier’s locations which would cause a shutdown of your business because alternative sources of supply may not be available.

“Contingent” Business Income Insurance/ Business Income from Dependent Properties can also be extended to cover your loss of net profits and continuing expenses during a shut-down of your operation that results from a loss at contributing/recipient/leader locations that are located outside the coverage territory of your domestic property policy (U.S., its territories and possessions, Puerto Rico, and Canada).

In addition, many firms with “just in time” inventory programs negotiate exclusive agreements with suppliers to hold raw materials or supplies for them. If a large loss occurs at the exclusive supplier’s premises, the insured would incur the additional cost of renegotiating another deal with a different supplier who may not grant the attractive terms of the previous supplier. The shutdown of your operations, caused by the flow of raw materials ending, can create a Business Income loss. This could be insured under Business Income from Dependent Properties Coverage.