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Insurance coverage for business income: What contractors need to know

Contractors may be vulnerable to fluctuations in their cash flow, leading to a need for business income insurance and coverage for extra expenses.

By George E. Krauss, Donald S. Malecki & Susan Massmann | Updated on November 08, 2017

Business income insurance covers the income of the business, therefore, it’s fundamental that there be earnings and that earnings continue to be possible. If a business is idle and likely to remain that way for a long time, there are neither present nor prospective earnings and no need for business income coverage. Construction companies and contractors may face this situation when there’s a significant slowdown in large projects.

But the mere fact that a business is not operating doesn’t necessarily eliminate the need for this coverage. If a contractor is definitely scheduled to resume operations but the property is damaged or destroyed by an insured peril, there will be a loss of income and, hence, a business income exposure. The exposure begins on the date operations were scheduled to resume. A seasonal business, such as an ice cream shop in a vacation area, is one example.

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