Business Income Coverage – Have you updated coverage for space that you lease?

Joe Buick - Vice President

Joe Buick – Vice President

Does your business lease space to others? Even if your “primary” business is not to do this, are you leasing some extra floor space to another entity? This could be manufacturing space, storage space, or office/retail space. If you are, what is the annual “rents” income from this revenue stream? During the economic downturn many companies did indeed lease excess space to others as their own need for this space had changed. If this lease income is of any consequence, you will need to confirm with your insurance agent that you are properly insuring this exposure included in your Business Income coverage policy.

Under the industry standard ISO coverage form (CP 00 30 06 07), the Business Income (and Extra Expense) stipulates that there are three options when choosing coverage. The option that you choose should be listed on the declaration page of your policy. The options are: (1) Business Income “Rental Value” (2) Business Income other than “Rental Value” (3) “Rental Value”. If your primary business is NOT leasing or renting to others, your coverage potentially could be designed with Option (2)….which will not include any rental income even if your property claim is paying for a Real Property loss.

As a business owner, or person responsible for buying insurance for your company, the news that your insurance policy will not reimburse for Rents could be a tough pill to swallow. Often this can be thousands of dollars per month depending on the space being leased.

Has your agent reviewed your Business Income policy with you to make sure that Rental Income is covered?