Calculating business income is essential in determining the right amount of business insurance for your company. Knowing how much income your business will generate in the coming year will allow you to make more informed decisions about purchasing business insurance. In this article, we will discuss what business income coverage helps cover and how to calculate it to ensure that you get the right amount of coverage for your business.

Business Income Coverage

Business income coverage is an important form of insurance for businesses of all sizes. It helps protect businesses from losses due to a decline in income caused by certain events. The coverage can be tailored to meet the specific needs of the business. 

Business income coverage helps cover losses due to the following: 

1. Loss of Business Income

This coverage helps businesses recoup lost income due to various events, such as natural disasters, power outages, or other disruptions. 

2. Loss of Accounts Receivable

This coverage helps businesses when their accounts receivable are not collected due to various events. It helps cover the lost revenue due to unpaid accounts, which can be especially important for businesses that rely on accounts receivable for their income.

3. Additional Expenses

This coverage helps businesses cover additional expenses related to a disruption in operations, such as additional expenses for repairs or replacements of equipment, materials, or supplies.

4. Loss of Rent

This coverage helps businesses if they cannot collect rent payments due to a disruption in operations. 

Calculating Business Income for Insurance

Calculating business income for insurance purposes can be complex, as it involves several factors. Business income is defined as a business’s net profit or loss for a specific period. It is important to accurately calculate business income for insurance purposes, as this will determine the insurance coverage necessary to protect the business’s assets.

1. Determine the Business’s Gross Income

This involves calculating the total revenue earned by the business, including all sales, services, and other income sources. It is important to also include any discounts or returns that may affect the total income.

2. Calculate the Total Expenses of the Business

This involves considering all costs associated with running the business, such as salaries, taxes, rent, utilities, and other overhead expenses. Including any one-time expenses that may occur during the time being calculated is important.

3. Calculate the Net Income or Loss of the Business

Once the total income and expenses have been determined, the net income or loss of the business for the period can be calculated. This is done by subtracting the total expenses from the total income. If the result is positive, then the business has a net income for the period, and if the result is negative, then the business has a net loss for the period.

4. Calculate the Business Income for Insurance Purposes

The business income can be calculated by multiplying the net income or loss by an applicable insurance rate. The rate will vary depending on the type of coverage the business is seeking, the size of the business, and the industry in which it operates.


By taking the time to calculate your business income and properly assess the amount of insurance you need, you can ensure that you are adequately protected in the event of a financial emergency. Doing so will also help you save money in the long run, as you will be better prepared to handle any unexpected costs or losses that may arise. By following these steps, businesses can ensure they have the right business insurance coverage to protect their assets.

Do you need help with business insurance in Lubbock, TX? Pascal Burke Insurance Brokerage Inc. got you covered. We specialize in giving you the best coverage that fits your business needs. We are specialists in various policies for small businesses and specialty contractors. Get in touch with us today!