What is a Business Income Coverage Form

A business income coverage (BIC) form is a type of property insurance policy which covers a company's loss of income due to a slowdown or temporary suspension of normal operations which stem from damage to its physical property. 

Coverage typically includes the loss of income but excludes ordinary operating expenses. Usually, coverage applies during the time required to repair or replace damaged property. However, for additional premiums, the term may extend to cover a specified number of days after the completion of repairs. The policy may also include the loss of rental income.

Business income coverage (BIC) is also called business interruption coverage.

BREAKING DOWN Business Income Coverage Form

​​​​​​​Business income coverage provides insurance for the loss of business income due to damage to physical property during a covered event. As with most insurance, the policy will not insure against acts of war, government seizure, and nuclear hazards. Also excluded are extreme weather events, earthquakes, flood, and mudslides.

Excluded operating expenses include marketing, payroll, insurance, and funds allocated for research and development. Some providers may offer policies which will cover some of these expenses at an additional premium.

The insurance agent who sells the business income policy must help the owner determine the amount of business income to cover. Also, policies may include an extra expense as a coverage category. An additional expense is any other expenditure the business incurs during the period of property damage, which would hasten a return to regular business activity. However, to be covered, an extra expense must not cost more than the amount of business income it brings in.

The process of determining the details of the business income coverage policy requires the owner to break down elements of the business income and outlays as well as create contingency plans to determine the proper and allowable amount of coverage.

Using a Second Location and Business Income Coverage

Business income coverage differs from property insurance. Property insurance covers damage to physical property, merchandise, and equipment in the location of the business, whether the business owner owns or rents the location. Business income coverage, in contrast, covers loss of business income resulting from damage to the structure which prevents the business from operating. This means if the company can get up and running from another location to begin doing business even before the property is repaired, the business income coverage will cease and only cover the time the company could not operate. Some policies may allow a specific rider added to the coverage which would allow additional protection.