What business income coverage usually pays

Business income coverage is often part of a commercial property policy. It is not in every policy. Check your declarations page. When you have it, it usually pays:

• Lost net income you would have earned if the damage had not happened.
• Continuing costs you still must pay while closed, like rent, loan payments and some payroll.
• Extra expense, which is added cost to keep running or reopen sooner, like a temporary location.

The policy terms that shape your claim

Business income claims turn on a few terms. The exact words are in your policy.

• Physical loss or damage. Most forms require it to your property, from a covered cause.
• Waiting period. Many policies do not pay for the first set number of hours after the damage.
• Period of restoration. Payment usually runs for the time it should reasonably take to repair or rebuild.
• Civil authority. Some policies pay when a government order blocks access because of nearby damage.
• Limits. The coverage may have a dollar cap, a time cap, or both.

Proving the income you lost

The insurer will want to see what your business earned before, and what it would have earned during the closure. Gather:

• Profit and loss statements for at least the past two years, and month by month for the past year.
• Tax returns.
• Payroll records and a list of bills you kept paying.
• Sales records that show seasons and trends.
• Receipts for every extra expense.

Insurers often use accountants on these claims. You may want your own accountant too. Disputes often come down to how the numbers are projected.

Extra expense: reopening sooner

Extra expense coverage can pay costs that shorten the closure or keep you running. Examples are renting a temporary space, moving equipment, paying overtime to finish repairs, or renting replacement machines.

Before you spend, tell the adjuster in writing what you plan and why. Ask whether the policy covers it. Keep every receipt. A cost that gets you open sooner can also lower the lost income part of the claim. That is often why policies include it.

If your business shares a building, check your lease too. It may say who must insure and repair what. See commercial leases.

Common disputes

• Whether the damage was a covered loss at all. See denied insurance claims.
• How long repairs should have taken. Delays by the insurer can stretch a closure.
• Whether sales would have been lower anyway.
• Which costs count as continuing costs.

If the insurer accepts the claim but disagrees on the amount, see the insurance appraisal clause. If it refuses to pay without reasonable cause, Missouri’s penalty law may apply after a written demand and 30 days (RSMo 375.296 and 375.420).

What to do now

1. Report the claim for both the building damage and lost income.
2. Get the full commercial policy, including the declarations page and every endorsement.
3. Photograph the damage and keep damaged stock until it is documented.
4. Track lost sales and every extra cost from day one.
5. Keep paying key bills if you can, and keep records of what you pay.
6. Log every call and keep every letter from the insurer.

Harjot Singh Padda, JD works with business owners on contracts and disputes. He can read your policy and explain what it covers. See also business law services.

Common questions

Related reading

• Property insurance claims overview
• Business litigation
• Breach of contract claims
• Insurance bad faith and coverage disputes