Business Income Coverage
Business income coverage replaces income lost and pays continuing expenses when a business cannot operate due to a covered property loss, similar to loss of rents for apartment properties.
Business income coverage is the broader commercial insurance term for coverage that replaces income lost during a period of restoration following a covered property loss. For apartment buildings, this coverage is often structured specifically as loss of rents, but the underlying concept is the same: protecting the owner's income stream when the property cannot generate revenue due to physical damage.
The coverage typically pays the difference between the income the property would have earned had no loss occurred and the income it actually earns during the restoration period, plus any continuing operating expenses that must be paid regardless of occupancy. This can include mortgage payments, property taxes, management fees, and utility base charges.
Business income coverage is triggered by direct physical loss or damage to the insured property from a covered peril. There is usually a waiting period, commonly 72 hours, before coverage begins. The coverage continues for the period of restoration, defined as the time reasonably needed to repair or replace the damaged property, subject to the policy's time limit. Owners should work with their insurance advisor to set a coverage limit that reflects the property's actual income and a realistic restoration timeline.