A business income coverage (BIC)refers to a specific property insurance policy that small companies take out for their businesses. The insurance contract offers these corporate enterprises adequate range for the temporary decline or suspension in their revenue-generating operations. This loss of operating revenue should result from severe damage to the corporations’ immoveable commercial property. The policy’s coverage only becomes applicable during the period it takes to repair, restore, demolish or replace this property. The financial support which the companies receive from the policy enables them to pay certain expenses to run their businesses. These include mortgages, payroll expenses, routine utility bills, and corporate tax payments.
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According to him, small companies occasionally face unforeseen disasters to their commercial properties. These include vandalism, arson, theft, and natural fires resulting from unintentional employee negligence. The incidences force the entrepreneurs of these corporations to temporarily cease business operations until the repair of the properties is complete. However, the disruption in their normal commercial activities results in a considerable loss in revenue which adversely affects their cash flow. Taking out a business income coverage insurance scheme enables the entrepreneurs of these corporate enterprises to overcome financial difficulties. The insurance policy indemnifies the companies from:
- Loss of revenue due to the disruption in business operations resulting from the property damage, and
- Loss of profits which companies would have been able to earn if the injury did not occur.
The money receivable from this insurance scheme enables the companies to pay for certain fixed operating expenses. These include business mortgages, lease payments, corporate taxes, and payroll expenses.
Specific Exclusions
Like other insurance policies, the business income coverage scheme contains specific exclusions that small companies should be aware of. The cases relate to the financial losses in which the corporations sustain anticipated unpredictable events which fall outside this insurance scheme’s scope. These occurrences are:
- Unforeseen extreme natural calamities like flash floods, earthquakes, hurricanes, and mudslides,
- Governmental seizures, damages due to hazardous nuclear accidents or foreign aggression, and
- The outbreak of severe epidemics, viruses, or mysterious communicable diseases.
According to Michael Saltzstein taking out a business income, a coverage insurance scheme is prudent for companies to recover financial losses resulting from property damage. However, these corporate enterprises should review the policy document thoroughly before buying this insurance scheme. They must have a thorough understanding of events and certain essential aspects of the project. These include events that trigger the coverage, the waiting period, claim documentation, and extra expense coverage. Only then can the corporations decide whether to go ahead with the purchase.
