West Virginia Property and Casualty Licensing Practice Exam

What kind of loss would be covered by a business income policy?

1. Loss due to power outage

2. Loss due to theft

3. Loss of rental income

4. Loss of business income during repairs

The correct answer is: Loss of business income during repairs

A business income policy is specifically designed to protect businesses from income loss resulting from covered perils that disrupt their normal operations. This type of policy typically compensates for lost income due to events that force a business to temporarily suspend its operations, such as damage from a fire or a natural disaster. Choosing to focus on the loss of business income during repairs, this reflects the primary function of a business income policy, which is to provide financial support when a business is unable to generate income due to unavoidable interruptions. For instance, if a fire damages the premises and the business has to close for repairs, the policy would cover the income that the business would have earned during that period. The other options do not align with what a business income policy typically covers. While losses due to power outages, theft, and loss of rental income could impact a business's finances, they would generally be addressed through other types of insurance coverage rather than a business income policy. Therefore, the correct answer highlights the specific intent of a business income policy, emphasizing its role in compensating for income loss tied directly to the interruption of business operations due to repairs.