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EARNINGS (BUSINESS INTERRUPTION) COVERAGE
This form of insurance provides loss of income coverage (i.e., "disability
income") for your business by replacing your operating income during the
period when damage to the premises or other property prevents income from being
earned.
It is by means of your operating income that your business meets its expenses
of payroll, light, heat, advertising, telephone service, etc., and from which
your profit is derived. If you suffer a business interruption and have to close
for several months or operate at a reduced pace because of fire or other perils
covered by your Earnings insurance, this income will cease or be reduced.
For the purpose of this insurance coverage, "earnings" are defined
as the actual loss sustained by the insured as a direct result of business interruption
necessitated by damage or destruction of real or personal property. The damage
or loss must be caused by the insured perils.
Furthermore, "business income" is defined as the sum of total net
profit, payroll expense, taxes, interest, rents, and all other operating expenses
earned by the business.
The amount of coverage your Earnings insurance provides is established on
the basis of either amount of insurance or actual loss sustained for each 30-day
period of necessary business interruption caused by damage or loss from covered
perils. There are several ways to set up Business Interruption depending upon
your particular business. Monthly limitations, coinsurance, maximum time period
to be paid, etc.
In addition to Earnings insurance, it is also advisable to carry Extra Expense
insurance (see separate coverage explanation).
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