Property & Casualty Insurance Exam (National Portion)Property InsuranceMedium
A business owner's commercial property policy covers loss of business income. The policy has a 72-hour waiting period (deductible). If a covered peril forces the business to close for 10 days, how many days of business income loss will the policy cover?
- A10 days
- B7 days
- CNone, as the waiting period is too short.
- D3 days
Show answer & explanationAnswer & explanation
Correct answer: B. 7 days
A waiting period in business income coverage acts like a time deductible. The policy will begin paying only after this waiting period has passed. In this case, 10 days (240 hours) of closure minus the 72-hour waiting period equals 7 days (168 hours) of covered business income loss.
Why the other options are wrong
- A. This would be the amount covered if there was no waiting period.
- C. The waiting period is a deductible; after it's met, coverage applies.
- D. This is the waiting period itself, which is not covered.
Business Income Waiting Period (Deductible)
A period of time, typically 24-72 hours, that must pass after physical damage to property before business income coverage begins to pay for loss of income.
- Acts as a time deductible.
- Prevents small, short-term losses from being claimed.
- Coverage starts after the waiting period, for the remaining duration of the interruption.
Memory trick: Business income waiting is like a 'countdown' – no money until the clock runs out.