If your answer was “I have no idea,” you’re not alone. It’s a little-known fact that when a property is totally destroyed, it often takes six months to a year – and sometimes longer – for a small business to return to previous income and production levels.
During a business shutdown, customers often take their business elsewhere, and they may take their time finding their way back to you again. Meanwhile, you have to find a way to pay both your ongoing expenses and new ones – investments you need to make to get your business up and running faster.
The truth is that lost income and those extra expenses are typically the largest costs small business owners face when their property is destroyed. Buying Business Income and Extra Expense insurance can help cover those costs, but many small–business owners don’t have this optional coverage.
Business income insurance covers your lost Income. The concept of buying Business Income insurance along with your property insurance is simple. If your business property is destroyed, your sales and production schedules are usually disrupted, and while your business is out of commission, you lose income. In fact, many small and mid-sized businesses that suffer a property loss never fully recover to their pre-loss income levels.
When you have Business Income insurance, the insurer reimburses you for the net income your business would have earned if your business had not been shut down – or slowed down – due to covered damage to your property.
Regular Business Income insurance covers certain continuing costs that you face if your property is destroyed, such as payroll costs.
Extra Expense coverage is different. It covers necessary costs that you pay in order to get up and running more quickly. For example, an ice cream wholesaler might be able to reduce its losses by renting temporary warehouse space to keep inventory moving while their property is being repaired. When you have Extra Expense insurance, this is the type of added expense that is typically covered.
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