Commercial Property
Business Income Coverage Forms
WHAT IS COVERED
The Business Income coverage form indemnifies the insured for the
actual loss of business income during the "period of restoration" (defined
below). To be covered, the interruption of business must be caused by
direct physical damage to property at the premises described in the
policy, including personal property in the open (or on a vehicle) within
100 feet of the premises.
Period of Restoration - The "period of restoration" begins 72 hours after
the time of the actual physical loss or damage to the property at the
premises and ends on the date when the property should be repaired
with reasonable speed and similar quality. The policy covers the loss of
business income during the "period of restoration" plus certain stipulated
supplementary benefits, as defined, and offers specific optional benefits
(to be discussed later). The 72-hour period acts in the same manner as
a deductible.
Business Income - "Business income" is defined as the net profit or loss
before income taxes as would have been earned or incurred plus
continuing normal operating expenses. It also covers the loss of rents
sustained by a lessor, of the rents that a tenant would have to pay, if the
lease provided for the continuance or rents even during periods when
the premises was untenantable due to a casualty at the location.
The policy is not liable for the loss for the entire period until the property
is actually restored, but only for the time such repairs should normally
take. The insured may not wish to repair the damage, or may prefer not
to restore the property in the form in which it stood at the time of the loss.
Nevertheless, the liability of the company ceases after such time as
should be required with reasonable speed and similar quality.
Once the premises and personal property are restored (or should have
been restored), the company's liability ends, even though it may take
additional time for the insured's volume of sales or production to return to
normal.
Once the "period of restoration" (as defined in the policy) is over, the
policy is not liable for any continuing reduction in the volume of business
or for loss of customers, good will, contracts, valuable employees, even
if such are irrevocably lost to the business, except for the limited
"extended period" specifically provided, as set forth below.
The measure of loss is the future earnings that would have been earned
beginning with the date of the loss and ending on the date the damaged
building or equipment or machinery could have been restored. While the
experience of the business before the loss is taken into account in
arriving at the extent of the loss, it is the future earnings that are insured.
The period of indemnity is not limited by the expiration of the policy. If the
fire (or other insured peril) occurs while the policy is in force, the insured
is entitled to collect for as long as it would take to replace the damage,
even though this would extend past the expiration of the policy.
EXAMPLE: The insured carries a Business Income insurance policy which
expires on January 1, 2009. On December 25, 2008, her plant burns down.
It takes seven months to rebuild the structure and replace the machinery.
The insured is entitled to indemnity throughout this time, even though it
extends past the expiration of the policy.
Extended Business Income - If the "period of restoration" has ended, and
the insured still is sustaining a loss of business income, the policy will
pay for the actual loss sustained during this additional period up to a
maximum of 30 days. Coverage during this extended period will,
however, end during this 30-day period if the insured's business can be
restored to the condition it would have been in if no loss had occurred.
Longer periods of indemnity for extended business income (up to 360
days) are available by endorsement for an additional premium.
EXAMPLE: The insured suffers a loss at his premises due to a covered
cause of loss which results in physical damage to property at the premises
on August 1, 2008. The "period of restoration" ends on September 15, but
the insured's business income has not returned to the level it would have
reached if no loss had occurred. The policy will pay for the loss of income
during the 30 days from September 15 to October 15, at which time the
policy will have no further liability even if the level of business continues
lower than usual after this point.
Assume the same set of facts as in the above example, except that after
the "period of restoration" ends, the policy continues to pay under the
Extended Business Income provision and business returns to normal on
October 1. Coverage will then cease for any period beyond October 1.
It is important to note that this extended period of indemnity does not
become operative if the only property which has not been restored is
"finished stock."
NOTE: "Finished stock" is defined as any stock manufactured by the
insured, but not such property on the premises of any retailer insured under
the policy. It also includes alcoholic products being aged unless the
policy contains a coinsurance clause.
Extra Expense - The policy also covers extra expense which the insured
undertakes to minimize the "period of restoration," such as the extra cost
of continuing operations at the insured location, or at substitute premises;
or other expenses incurred if the business cannot be continued. These
expenses are covered as part of the business income loss up to the
policy limit.
Also covered are extra expenses incurred to replace property and to
restore information on valuable papers or records damaged in the loss.
This last group of expenses is covered only to the extent that they
actually reduce loss under the policy.
EXAMPLE: The insured is able to reduce a business income loss by
$1,000 by research that will cost $1,200. The policy will pay only $1,000
for this research, the amount by which the insured loss is reduced.
Civil Authority - Even when the insured's own facilities have not suffered
any direct loss or damage, direct physical damage by an insured peril at
other premises may impel the civil authorities to deny access to the
insured's undamaged premises while repairs are made to the other
location, or tests and investigations are completed.
NOTE: The physical damage that brings into action the order of the civil
authority preventing access to the insured premises does not have to take
place at premises adjacent to those of the insured.
The policy specifically extends to cover loss of business income so
engendered during the two weeks from the date of denial of access by
any civil authority.
Alterations and New Buildings - The Business Income policy will pay for
the loss of business income due to direct physical loss at the described
premises brought about by a covered cause of loss to:
New buildings, whether complete or under construction; alterations of
existing buildings or structures; supplies or building materials on or within
100 feet of the premises used in the construction or alteration or
incidental to the occupancy of the new buildings;
If such direct loss delays the start of operations, the "period of
restoration" begins on the date operations would have begun if the loss
had not occurred.
Newly Acquired Locations - This extension of coverage applies only if
the policy is written with a coinsurance clause of 50% or more. Such
policies are extended to cover business income at any location acquired
by the insured other than fairs or exhibitions. The maximum payable
under this extension is $100,000 at any location.
The insurance under this extension ends when the policy expires, or 30
days after the insured acquires or begins to construct the property, or
when the insured reports the values at the acquired property to the
company. An additional premium is charged for the extension of
coverage from the date the values are reported to the company.
This extension is additional insurance over and above the amount of the
underlying policy. Furthermore, the coinsurance clause does not apply to
this extension.
Like the Commercial Property policy covering physical property which
can be written under one of three cause of loss forms-basic, broad and
special, the Business Income policy can be written under one of these
forms.
Business Income Coverage Forms
WHAT IS COVERED
The Business Income coverage form indemnifies the insured for the
actual loss of business income during the "period of restoration" (defined
below). To be covered, the interruption of business must be caused by
direct physical damage to property at the premises described in the
policy, including personal property in the open (or on a vehicle) within
100 feet of the premises.
Period of Restoration - The "period of restoration" begins 72 hours after
the time of the actual physical loss or damage to the property at the
premises and ends on the date when the property should be repaired
with reasonable speed and similar quality. The policy covers the loss of
business income during the "period of restoration" plus certain stipulated
supplementary benefits, as defined, and offers specific optional benefits
(to be discussed later). The 72-hour period acts in the same manner as
a deductible.
Business Income - "Business income" is defined as the net profit or loss
before income taxes as would have been earned or incurred plus
continuing normal operating expenses. It also covers the loss of rents
sustained by a lessor, of the rents that a tenant would have to pay, if the
lease provided for the continuance or rents even during periods when
the premises was untenantable due to a casualty at the location.
The policy is not liable for the loss for the entire period until the property
is actually restored, but only for the time such repairs should normally
take. The insured may not wish to repair the damage, or may prefer not
to restore the property in the form in which it stood at the time of the loss.
Nevertheless, the liability of the company ceases after such time as
should be required with reasonable speed and similar quality.
Once the premises and personal property are restored (or should have
been restored), the company's liability ends, even though it may take
additional time for the insured's volume of sales or production to return to
normal.
Once the "period of restoration" (as defined in the policy) is over, the
policy is not liable for any continuing reduction in the volume of business
or for loss of customers, good will, contracts, valuable employees, even
if such are irrevocably lost to the business, except for the limited
"extended period" specifically provided, as set forth below.
The measure of loss is the future earnings that would have been earned
beginning with the date of the loss and ending on the date the damaged
building or equipment or machinery could have been restored. While the
experience of the business before the loss is taken into account in
arriving at the extent of the loss, it is the future earnings that are insured.
The period of indemnity is not limited by the expiration of the policy. If the
fire (or other insured peril) occurs while the policy is in force, the insured
is entitled to collect for as long as it would take to replace the damage,
even though this would extend past the expiration of the policy.
EXAMPLE: The insured carries a Business Income insurance policy which
expires on January 1, 2009. On December 25, 2008, her plant burns down.
It takes seven months to rebuild the structure and replace the machinery.
The insured is entitled to indemnity throughout this time, even though it
extends past the expiration of the policy.
Extended Business Income - If the "period of restoration" has ended, and
the insured still is sustaining a loss of business income, the policy will
pay for the actual loss sustained during this additional period up to a
maximum of 30 days. Coverage during this extended period will,
however, end during this 30-day period if the insured's business can be
restored to the condition it would have been in if no loss had occurred.
Longer periods of indemnity for extended business income (up to 360
days) are available by endorsement for an additional premium.
EXAMPLE: The insured suffers a loss at his premises due to a covered
cause of loss which results in physical damage to property at the premises
on August 1, 2008. The "period of restoration" ends on September 15, but
the insured's business income has not returned to the level it would have
reached if no loss had occurred. The policy will pay for the loss of income
during the 30 days from September 15 to October 15, at which time the
policy will have no further liability even if the level of business continues
lower than usual after this point.
Assume the same set of facts as in the above example, except that after
the "period of restoration" ends, the policy continues to pay under the
Extended Business Income provision and business returns to normal on
October 1. Coverage will then cease for any period beyond October 1.
It is important to note that this extended period of indemnity does not
become operative if the only property which has not been restored is
"finished stock."
NOTE: "Finished stock" is defined as any stock manufactured by the
insured, but not such property on the premises of any retailer insured under
the policy. It also includes alcoholic products being aged unless the
policy contains a coinsurance clause.
Extra Expense - The policy also covers extra expense which the insured
undertakes to minimize the "period of restoration," such as the extra cost
of continuing operations at the insured location, or at substitute premises;
or other expenses incurred if the business cannot be continued. These
expenses are covered as part of the business income loss up to the
policy limit.
Also covered are extra expenses incurred to replace property and to
restore information on valuable papers or records damaged in the loss.
This last group of expenses is covered only to the extent that they
actually reduce loss under the policy.
EXAMPLE: The insured is able to reduce a business income loss by
$1,000 by research that will cost $1,200. The policy will pay only $1,000
for this research, the amount by which the insured loss is reduced.
Civil Authority - Even when the insured's own facilities have not suffered
any direct loss or damage, direct physical damage by an insured peril at
other premises may impel the civil authorities to deny access to the
insured's undamaged premises while repairs are made to the other
location, or tests and investigations are completed.
NOTE: The physical damage that brings into action the order of the civil
authority preventing access to the insured premises does not have to take
place at premises adjacent to those of the insured.
The policy specifically extends to cover loss of business income so
engendered during the two weeks from the date of denial of access by
any civil authority.
Alterations and New Buildings - The Business Income policy will pay for
the loss of business income due to direct physical loss at the described
premises brought about by a covered cause of loss to:
New buildings, whether complete or under construction; alterations of
existing buildings or structures; supplies or building materials on or within
100 feet of the premises used in the construction or alteration or
incidental to the occupancy of the new buildings;
If such direct loss delays the start of operations, the "period of
restoration" begins on the date operations would have begun if the loss
had not occurred.
Newly Acquired Locations - This extension of coverage applies only if
the policy is written with a coinsurance clause of 50% or more. Such
policies are extended to cover business income at any location acquired
by the insured other than fairs or exhibitions. The maximum payable
under this extension is $100,000 at any location.
The insurance under this extension ends when the policy expires, or 30
days after the insured acquires or begins to construct the property, or
when the insured reports the values at the acquired property to the
company. An additional premium is charged for the extension of
coverage from the date the values are reported to the company.
This extension is additional insurance over and above the amount of the
underlying policy. Furthermore, the coinsurance clause does not apply to
this extension.
Like the Commercial Property policy covering physical property which
can be written under one of three cause of loss forms-basic, broad and
special, the Business Income policy can be written under one of these
forms.
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MY Insurance Agency
The materials on this website are meant to
be informative in nature. Due to the ever
changing and varying state laws, and the fact
some insurers offer coverage in slightly
different forms from the Insurance Services
Office (ISO) standard forms, we cannot
guarantee the accuracy of the materials on
this page.
be informative in nature. Due to the ever
changing and varying state laws, and the fact
some insurers offer coverage in slightly
different forms from the Insurance Services
Office (ISO) standard forms, we cannot
guarantee the accuracy of the materials on
this page.