What does business income coverage protect, and when is it used?

• A. It covers net income lost and continuing expenses when a business is interrupted by a covered loss.
• B. It pays for property damage to the business's physical assets.
• C. It provides liability coverage for third parties.
• D. It covers employee health benefits.

Answer: (A)

Business income coverage protects the earnings a business would have netted and the ongoing expenses it must continue to pay when operations are temporarily interrupted by a covered loss. It kicks in after a qualifying peril damages the business premises (or disrupts operations), and provides funds for the net income that’s lost and for fixed costs that continue during the restoration period, helping the business avoid a cash-flow crisis while repairs are made. This is the best choice because it directly addresses both the income not earned and the expenses that must be paid despite the shutdown. It doesn’t pay for property damage itself (that’s handled by property coverage), nor does it provide liability protection for third parties or employee benefits.