The Importance of Picking Your Business Income and Extra Expense Limit

Your business income and extra expense (BI/EE) limit is very important when it comes to your property coverage. This limit comes into play when you have direct physical damage or loss to property.

This could be through a natural disaster such as a hurricane coming through your area and causing flooding to your main office, for example. As a result, you most likely will need to close your office. With that, you not only would have damage to the office and anything in it but could very likely need to relocate to another office you own or incur the added cost of renting a substitute building. That can become costly quickly, because let’s face it, who knows how long you will actually be displaced to correct the issue. It’s likely others in your community have damages, too, and you’re all sharing resources to get back up and running.

While you are down you may also lose potential revenue, whether it be from your network being down or customers unable to come in to pay their bill. Are outside workers needing to work overtime to get lines put back up or fix any damages to the network. Do you need to rush ship equipment in to replace the damaged equipment? Everything above is an example of what could fall under the BI/EE limit.

So how do you know if your limit is high enough? There are many methodologies used to calculate the business income limit that you need: You can calculate three to six months’ worth of revenue (if you think you could be down that long); you can calculate your revenue from the previous 12 months and account for projected growth and/or new operations and then estimate your worst-case scenario of how long you could be totally down and use that number; or you can use the worksheet in your workbook on the Property Inquiry tab. It is important for you to take some time to calculate this exposure and be sure you’re insured properly to the right limits should you ever need it.