Search
 

Lost Business Income 101

In a perfect world, lost business income would be a straightforward calculation upon which the insured and the insurer would agree.

By Rebecca Maguire,CPA, Cva, Cff | Updated on December 02, 2009
In a perfect world, lost business income would be a straightforward calculation upon which the insured and the insurer would agree. Because calculation of lost business income is based on “what-ifs” — as in, what if the fire, windstorm, water break, or so on hadn’t happened — it necessarily involves assumptions with respect to what might have been.

The essential purpose of business-income protection is to put the insured in the same place, financially speaking, that he would have been had no loss occurred. Many factors can muddy the water in terms of calculating lost business income. Among those that come to mind are inadequate or incomplete records and unrealistic expectations on the part of the insured.

Taking a step back for a moment, lost business income results from the interruption of normal business operations because of direct physical damage of property under a covered cause of loss. The business either shuts down or continues operations in a reduced capacity. In most instances, revenue falls or stops while at least some expenses continue. The insured seeks compensation under the lost business income provisions of its policy.

Want to continue reading?
Become a Free
PropertyCasualty360 Digital Reader.

INCLUDED IN A DIGITAL MEMBERSHIP:

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

PropertyCasualty360

Join PropertyCasualty360

Don’t miss crucial news and insights you need to make informed decisions for your P&C insurance business. Join PropertyCasualty360.com now!

  • Unlimited access to PropertyCasualty360.com - your roadmap to thriving in a disrupted environment
  • Access to other award-winning ALM websites including BenefitsPRO.com, ThinkAdvisor.com and Law.com
  • Exclusive discounts on PropertyCasualty360, National Underwriter, Claims and ALM events

Already have an account? Sign In Now
Join PropertyCasualty360

Copyright © 2024 ALM Global, LLC. All Rights Reserved.