Are you a small business owner who has suffered a recent loss? Do you have business interruption insurance? Business interruption insurance is in place to protect you and your assets in the event of a loss of income that is due to damage to your business or property, lost inventory, theft, natural disasters and more. Business owners who have a loss of income need to know how to calculate the value of a business insurance loss to file an accurate claim and we can help at Saxton Law Firm in Kansas City, MO.
How To Assess Business Insurance Losses for Your Claim
When you file a business interruption insurance claim – you may need to provide a Proof of Loss statement – and you may need to calculate the amount of your business income losses for the claim. This can be complicated and may require some math on your part, so you had better get your calculator ready. There are a pair of methods used to calculate business income losses – a Top-Down or Gross Receipts Method and a Bottom-Up or Net Income Method.
Gross Receipts Method
Business owners who use the Top-Down/Gross Receipts Method will need to calculate their Lost Sales and the Saved Expenses to determine their business income losses and the amount that the insurance claim should be. Here is a quick look at the equations you will need to calculate the total with this method.
- Lost Sales = Projected Sales – Actual Sales
- Business Income Losses = Lost Sales – Saved Expenses
Net Income Method
The Net Income Method is another way for you to calculate your business income losses for an insurance claim and may be simpler for you to use. To use the Bottom-Up/Net Income Method, you will need to calculate your Lost Net Income for the period of loss and your Incurred Operating Expenses. Here is a quick example of how to use the Net Income Method.
- Lost Net Income = Projected Net Income – Actual Net Income
- Business Income Losses = Lost Net Income + Incurred Operating Expenses
What Documents Do You Need to Calculate Business Income Losses?
We know that it can be stressful when you are faced with a financial, product or property loss with your business and you may not know where to start. We want to help at Saxton Law Firm. You will need two standard documents to help determine your business income losses for your insurance claim – Tax Returns and Net Income Statements. These documents should provide the information you need to calculate your losses and we recommend that you use returns and statements for the last three years to provide a more accurate calculation.
Have you had damage to your business or product from a fire or flood? Has your business been the victim of theft that has resulted in lost income? Business interruption insurance is what you need to protect your assets and you may have questions about your insurance like – how to calculate the value of a business insurance loss. Contact Saxton Law Firm today to get the help you need in Kansas City!