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Business Income Effects on Commercial Insurance Rates

Your business income is used to correctly calculate adequate coverage needed for your business income insurance policy, which is also known as "business interruption coverage). Some commercial property insurance rates include business income (BI) coverage; a business owner's policy (BOP) may as well. Or, business income insurance may be purchased as a separate coverage for your business.

Commercial property insurance rates are calculated to provide coverage for serious loss or direct physical damage to your real estate or property resulting from a covered loss such as a fire.

In the event of a total or partial shut-down of your operations resulting from a covered loss, business income insurance policies will generally cover indirect losses.

Your policy may be designed to compensate for lost income, payroll, lost profits, continued operating expenses, mortgage, property taxes and extra expenses incurred during a forecasted period of time it takes to restore your operations.

In calculating any commercial insurance rates it is important to know the definition and application of terms used.

Of particular importance in determining your rate for  business income insurance, is how your "business income" is defined. The Insurance Service Office (ISO) defines business income as "the sum of a) your net income (net profit or loss before income taxes) that would have been earned or incurred if no physical loss or damage had occurred) and b) the continuing normal operating expenses including payroll."

The sum of your business income as defined above will then be used in calculating an adequate amount of coverage needed for your business income insurance policy. It is recommended you seek the advise of insurance brokers or agents who specialize in Business Income as it relates to your specific type of business to ensure appropriate coverage at a reasonable rate.