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💼 '''Loss of income insurance''' provides financial protection when a covered event — such as a fire, natural disaster, or other insured [[Definition:Peril | peril]] — interrupts a business's or individual's ability to earn revenue. In its commercial form, it is most often encountered as [[Definition:Business interruption insurance | business interruption]] coverage embedded within a [[Definition:Commercial property insurance | commercial property]] policy, compensating the insured for lost [[Definition:Net income | net income]] and continuing [[Definition:Fixed expense | fixed expenses]] during the period required to restore operations. Personal lines equivalents exist as well, covering lost rental income for [[Definition:Landlord insurance | landlord]] policies or wages for certain [[Definition:Disability insurance | disability]]-adjacent products.

⚙️ A loss of income claim typically begins after physical damage to the insured premises triggers a [[Definition:Period of restoration | period of restoration]] — the time it takes to repair or rebuild to pre-loss condition. The insurer calculates the covered loss by comparing the income the business would have earned (absent the event) against what it actually earned during the interruption, factoring in [[Definition:Continuing expense | continuing expenses]] like rent, loan payments, and payroll that persist even while revenue has stopped. Policies usually specify an [[Definition:Indemnity period | indemnity period]] maximum — 12 months is common, though complex operations may negotiate longer — and a [[Definition:Waiting period | waiting period]] (analogous to a [[Definition:Deductible | deductible]]) before coverage activates. Extensions such as [[Definition:Contingent business interruption | contingent business interruption]], which covers income lost due to damage at a key [[Definition:Supplier | supplier]] or customer's premises, broaden the protection further.

🏢 The importance of loss of income insurance became starkly visible during widespread events like hurricanes, wildfires, and the COVID-19 pandemic, when businesses suffered prolonged shutdowns and discovered the limits — and sometimes the gaps — in their coverage. Adequate coverage requires careful estimation of potential income loss and restoration timelines, often with input from [[Definition:Forensic accountant | forensic accountants]] and [[Definition:Risk engineer | risk engineers]]. [[Definition:Underwriter | Underwriters]] evaluate the insured's financial records, industry vulnerability, and [[Definition:Business continuity plan | business continuity planning]] to price the coverage, while [[Definition:Claims adjuster | adjusters]] handling these claims must reconstruct hypothetical earnings — a process that frequently involves negotiation. For any business whose value depends on continuous operations, loss of income insurance represents one of the most consequential components of its [[Definition:Insurance program | insurance program]].

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Business interruption insurance]]
* [[Definition:Period of restoration]]
* [[Definition:Contingent business interruption]]
* [[Definition:Extra expense coverage]]
* [[Definition:Commercial property insurance]]
* [[Definition:Indemnity period]]
{{Div col end}}

Definition:Loss of income insurance - Revision history

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