What does business income coverage pay for?

Lost income and continuing expenses during suspension of operations. Business income coverage pays for lost net income (profits the business would have earned) and continuing normal operating expenses when business operations are suspended due to a covered property loss.

A West Virginia business has a building worth $400,000 with 80% coinsurance. They carry $240,000 in coverage and suffer a $80,000 loss. What will the policy pay (before deductible)?

$60,000. Using the coinsurance formula: ($240,000 carried / $320,000 required) x $80,000 = $60,000. The 80% coinsurance requires $320,000 ($400,000 x 80%), but only $240,000 was carried, resulting in a 75% payment ($240,000/$320,000 = 75%).

What type of insurance covers contractors' heavy equipment at various job sites?

Inland marine insurance (Contractors Equipment). Contractors Equipment floater, a type of inland marine insurance, covers heavy equipment such as bulldozers, cranes, and excavators at various job sites. This coverage is designed for property that moves from location to location.

West Virginia Commercial Property Insurance

Commercial Property Coverage Forms

Building and Personal Property Coverage Form (BPP)

The BPP is the primary commercial property coverage form:

Coverage	Description
Building	Owned structures, fixtures, permanently installed equipment
Business Personal Property	Inventory, furniture, equipment, supplies
Personal Property of Others	Customer property in insured's care, custody, control

Covered Property Details

Building Coverage Includes:

Building structure itself
Completed additions
Fixtures including outdoor fixtures
Permanently installed machinery and equipment
Personal property used to maintain building

Business Personal Property Includes:

Furniture and fixtures
Machinery and equipment
Stock (inventory)
Tenant's improvements and betterments
Leased personal property for which insured has duty to insure

Coverage Forms

Form	Building Coverage	Personal Property
Basic Form	Named perils	Named perils
Broad Form	Broader named perils	Broader named perils
Special Form	Open perils (all-risk)	Open perils

Named Perils (Basic Form)

Covered Perils
Fire
Lightning
Explosion
Windstorm or hail
Smoke
Aircraft or vehicles
Riot or civil commotion
Vandalism
Sprinkler leakage
Sinkhole collapse
Volcanic action

Special Form Coverage

Open perils coverage insures against all risks of direct physical loss EXCEPT those specifically excluded.

Common Exclusions:

Ordinance or law
Earth movement (except mine subsidence if endorsed)
Governmental action
Nuclear hazard
War
Water (flood, surface water)
Utility services failure
Mechanical breakdown
Neglect
Weather conditions to property outdoors

Business Income Coverage

What It Covers

Business income coverage pays for:

Component	Description
Lost Net Income	Profits business would have earned
Continuing Expenses	Normal operating expenses that continue
Payroll	Optional, can include or exclude

Coverage Trigger

Business income coverage pays when:

Direct Physical Loss - Covered peril damages property
Suspension of Operations - Business cannot operate normally
Period of Restoration - Time to repair, rebuild, replace

Extended Business Income

Covers income loss after repairs complete:

Feature	Details
Purpose	Transition back to normal operations
Period	Typically 30 days after restoration
Coverage	Lost income as business rebuilds customer base

Extra Expense Coverage

Aspect	Details
Purpose	Pay extra costs to continue operations
Examples	Temporary location, equipment rental, overtime
Benefit	Minimize business interruption loss
Limit	Separate limit or combined with business income

Coinsurance

How Coinsurance Works

Coinsurance penalizes under-insurance:

Formula: $\text{Payment} = \frac{\text{Insurance Carried}}{\text{Insurance Required}} \times \text{Loss} - \text{Deductible}$

Where:

Insurance Required = Property Value × Coinsurance %
Common percentages: 80%, 90%, 100%

Example Calculation

Factor	Amount
Building Value	$500,000
Coinsurance	80%
Required Insurance	$400,000
Actual Insurance	$300,000
Loss	$100,000
Deductible	$1,000

Calculation: $\text{Payment} = \frac{$300,000}{$400,000} \times $100,000 - $1,000 = $74,000$

The insured receives $74,000 instead of $99,000 because of inadequate coverage.

Avoiding Coinsurance Penalty

Strategy	How It Works
Carry Required Amount	Insure at least 80% (or required %) of value
Agreed Value	Pre-agree on property value with insurer
Inflation Guard	Automatic coverage increases
Regular Appraisals	Update values periodically

West Virginia Commercial Considerations

Mine Subsidence for Commercial

Consideration	Details
Exposure	Commercial buildings in mining areas at risk
Standard Coverage	Typically excluded
Endorsement	Available for additional premium
Importance	Critical for buildings in former mining regions

Flood Exposure

Issue	Details
Mountain Terrain	Flash flooding common in valleys
River Flooding	Ohio River, Kanawha River, others
Standard Policy	Flood excluded
Solutions	NFIP commercial flood, private flood insurance

Windstorm Considerations

Factor	Impact
Mountain Weather	Strong winds in elevated areas
Deductibles	May have percentage windstorm deductibles
Percentage Deductible	Calculated as % of Coverage A

Inland Marine Insurance

What It Covers

Inland marine covers property:

In transit over land
At various locations
Specialized equipment
Property of a mobile nature

Common Inland Marine Coverages

Coverage	Description
Contractors Equipment	Heavy equipment at job sites
Builders Risk	Construction projects
Motor Truck Cargo	Goods being transported
Installation Floater	Equipment being installed
Electronic Data Processing	Computers and data
Valuable Papers	Important documents
Signs	Outdoor signs
Accounts Receivable	Records of money owed

Builders Risk

Feature	Details
Who Needs It	Contractors, property owners during construction
What's Covered	Building under construction, materials, supplies
Coverage Trigger	Direct physical loss
Duration	Until construction complete or policy expires

Commercial Package Policy (CPP)

Structure

A CPP combines multiple coverages:

Component	Coverage
Common Declarations	Named insured, policy period
Common Conditions	Applies to all coverages
Property Coverage	BPP, Business Income, etc.
Liability Coverage	CGL if included
Other Coverages	Crime, inland marine, auto

Benefits of Package

Benefit	Description
Convenience	One policy for multiple coverages
Cost Savings	Often cheaper than separate policies
Coordination	Coverages work together
Simplified Administration	One renewal, one bill

Business Owners Policy (BOP)

What It Is

A BOP is a simplified package for small businesses:

Feature	Details
Target Market	Small to medium businesses
Standard Coverages	Property, liability, business income included
Simplified	Less customization, easier to understand
Cost	Often more affordable

Eligible Businesses

Typically Eligible	Usually Not Eligible
Retail stores	Manufacturers
Offices	Contractors
Restaurants (limited)	Auto dealers
Service businesses	Bars/taverns

BOP Standard Coverages

Coverage	Included
Building	Yes (if owned)
Business Personal Property	Yes
Business Income	Yes
General Liability	Yes
Medical Payments	Yes

Exam Tip: Coinsurance penalizes under-insurance. Commercial property policies typically require carrying 80%, 90%, or 100% of property value to avoid becoming a co-insurer of your own loss.

West Virginia Property & Casualty Insurance

Key Takeaways

West Virginia Commercial Property Insurance

Commercial Property Coverage Forms

Building and Personal Property Coverage Form (BPP)

Covered Property Details

Coverage Forms

Named Perils (Basic Form)

Special Form Coverage

Business Income Coverage

What It Covers

Coverage Trigger

Extended Business Income

Extra Expense Coverage

Coinsurance

How Coinsurance Works

Example Calculation

Avoiding Coinsurance Penalty

West Virginia Commercial Considerations

Mine Subsidence for Commercial

Flood Exposure

Windstorm Considerations

Inland Marine Insurance

What It Covers

Common Inland Marine Coverages

Builders Risk

Commercial Package Policy (CPP)

Structure

Benefits of Package

Business Owners Policy (BOP)

What It Is

Eligible Businesses

BOP Standard Coverages

West Virginia Property & Casualty Insurance

1Introduction: West Virginia P&C Insurance Exam Overview

2Chapter 1: West Virginia P&C Insurance Regulation & Licensing

3Chapter 2: West Virginia Property Insurance

4Chapter 3: West Virginia Casualty & Auto Insurance

5Chapter 4: West Virginia Ethics & Professional Conduct

Key Takeaways

West Virginia Commercial Property Insurance

Commercial Property Coverage Forms

Building and Personal Property Coverage Form (BPP)

Covered Property Details

Coverage Forms

Named Perils (Basic Form)

Special Form Coverage

Business Income Coverage

What It Covers

Coverage Trigger

Extended Business Income

Extra Expense Coverage

Coinsurance

How Coinsurance Works

Example Calculation

Avoiding Coinsurance Penalty

West Virginia Commercial Considerations

Mine Subsidence for Commercial

Flood Exposure

Windstorm Considerations

Inland Marine Insurance

What It Covers

Common Inland Marine Coverages

Builders Risk

Commercial Package Policy (CPP)

Structure

Benefits of Package

Business Owners Policy (BOP)

What It Is

Eligible Businesses

BOP Standard Coverages