Ask the Experts: What is Business Income coverage?

Most of us focus on the physical aspects of a property incident. It’s important to remember that the other half of the story. Buildings left unable to operate represent a different kind of loss. These losses could include lost income, rentals, or other expenses.

The CSD Pool includes up to $250,000 for Business Income including Extra Expense/Rental Income for a covered loss. Business Income will pay for net profit or net income that would usually be earned by normal operations had there not been a loss, including payroll. Extra Expense coverage pays for many of the additional costs that your district would not normally pay, but become necessary as a result of the loss. Depending on the size and responsibilities of the district, $250,000 may not be enough. If your facility earns essential income from fees or events, your income could become seriously jeopardized by a large loss. The purpose of Business Interruption is to cover the ongoing operations of a district as well as their employee payroll.

How it helps the district’s operations

In order to remain in business, relocation is often the first action necessary after a property loss. Business Income coverage can pay for ongoing lease payments, utilities, and income earned based on prior year costs at the same time of year. If your district rents out a building that is now damaged and not accessible, the Pool will provide payment of lost rent. During the period of restoration to your damaged building, extra expenses from relocation could be moving costs, rented equipment, and office space.

How it helps employees

As mentioned above, Business Income can continue providing the ordinary payroll of your employees. This is especially important for districts that are dependent on their staff to continue their operations to meet the needs of their constituents. For districts in areas where widespread covered perils like floods and wildfire could occur, extra expenses like lodging and transportation for employees is something to consider in case of displacement or ingress/egress issues.

This is not a complete overview of everything that Business Interruption covers, but districts need to determine whether $250,000 is enough to pay for continuation of the district’s operations after a loss. We recommend completing our Business Income Worksheet to evaluate the exposures and costs your district would likely incur in such a scenario. The worksheet can be found on the CSD Pool website. Districts should also assess extra expenses that may incur after a loss especially. If you feel that $250,000 in coverage is not sufficient, please contact your broker or the Pool.

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