Business Income Coinsurance Calculator
Enter projected income, continuing expenses, payroll, restoration time, and policy limits to estimate the business income limit you may need and how a sample loss would pay.
Recommended minimum limit$690,000.00
- 12-month business income exposure
- $800,000.00
- Restoration-period income need
- $600,000.00
- Restoration percentage
- 75%
- Suggested declaration percentage
- 80%
- Required limit for coinsurance compliance
- $640,000.00
- Limit surplus or shortfall
- $10,000.00
- Coinsurance compliance ratio
- 100%
- Calculated deductible
- $3,076.92
- Estimated claim payment
- $446,923.08
- Estimated unrecovered loss
- $3,076.92
Assumes the coinsurance ratio applies to business income loss but not to extra expense.
The combined sample payment is capped at the entered policy limit.
How to use this calculator
- Enter projected net income, continuing expenses, and any separately covered ordinary payroll.
- Estimate the longest realistic restoration period for rebuilding, equipment replacement, stock, and resumed operations.
- Enter the policy coinsurance percentage, business income limit, and a sample business income and extra expense loss.
- Choose the deductible type from the policy and review the recommended limit, compliance ratio, deductible, and sample payment.
How the business income coinsurance estimate works
Business income coverage is usually sized from expected net income plus operating expenses that would continue after a covered shutdown. This calculator follows that worksheet logic, then tests the selected policy limit against a coinsurance requirement and a sample claim.
The 12-month business income exposure is:
B = max(0, annual net income + continuing expenses + included ordinary payroll)
The restoration-period need is R = B × restoration months ÷ 12. The required limit for coinsurance compliance is Q = B × coinsurance percentage. The recommended minimum limit shown here is max(R, Q) + extra expense, because the limit should be large enough for both the declared coinsurance basis and the modeled restoration period.
For the sample claim, the compliance ratio is k = 1 when the required limit is zero; otherwise it is min(1, policy limit ÷ Q). A flat deductible is taken as entered. An average daily value deductible is B ÷ annual operating days × ADV days. The estimated payment is min(policy limit, max(0, business income loss × k − deductible) + extra expense). The unrecovered loss is the total sample loss minus that payment, never below zero.
What moves the result most
The largest drivers are the annual exposure and the selected coinsurance percentage. A growing business can be compliant at policy inception and underinsured later if projected income, payroll, rent, or other continuing expenses increase. Restoration time matters because a nine-month rebuilding assumption uses 75% of annual exposure, while an eighteen-month assumption points past 125% and may require a different coverage structure.
Extra expense affects the recommended minimum limit and can also push the sample payment into the policy limit cap. The calculator treats extra expense separately from the business income coinsurance penalty because many forms do not reduce extra expense by the same ratio, but the actual policy wording controls.
What this calculator leaves out
This tool does not decide coverage or value a claim. It does not model monthly limits of indemnity, maximum-period-of-indemnity options, agreed value, extended business income, civil authority, contingent business interruption, payroll limitation endorsements, seasonal values, ordinary payroll duplication, jurisdiction-specific rules, insurer worksheets, or claim-adjuster rounding. Use it to check the mechanics before reviewing the worksheet and declarations with an accountant, agent, broker, or risk-management professional.
Worked example
Suppose projected annual net income is $250,000, continuing expenses are $350,000, and separately insured ordinary payroll is $200,000. The 12-month exposure is $800,000. A nine-month restoration period needs $600,000, and the restoration percentage is 75%, so the next common declaration percentage is 80%.
With an 80% coinsurance clause, the required compliant limit is $640,000. Adding $50,000 of extra expense gives a recommended minimum limit of $690,000. A $700,000 policy limit is therefore $10,000 above the recommendation and has a 100% compliance ratio.
For a $400,000 business income loss, $50,000 of extra expense, and a one-day average daily value deductible based on 260 operating days, the deductible is about $3,077. The estimated payment is about $446,923, leaving about $3,077 unrecovered.
Common questions
How is business income calculated for coinsurance?
The usual starting point is projected net income before income taxes plus continuing operating expenses, with separately insured ordinary payroll added if it is not already included. This calculator floors that annual exposure at zero so an operating loss larger than continuing expenses does not create a negative insurance value.
Why is gross revenue not the business income exposure?
Gross revenue includes costs that may not continue during a shutdown, such as cost of goods sold or other noncontinuing expenses. Business income worksheets focus on the income and continuing expense stream that would need to be protected during restoration. The exact worksheet categories should be reviewed with the policy and financial statements.
How does an 80% business income coinsurance clause work?
An 80% clause generally requires a limit equal to at least 80% of the annual business income exposure. If the exposure is $800,000, the compliance limit is $640,000. Carrying less than that can reduce the business income part of a partial loss by the same ratio.
What is an average daily value deductible?
An average daily value deductible converts annual business income exposure into a daily value using the normal operating days for the year. The daily value is multiplied by the deductible days in the policy. A higher annual exposure or fewer operating days increases that deductible.
Does coinsurance reduce extra expense coverage?
This calculator assumes the coinsurance ratio reduces the business income loss but not the extra expense loss. That is a planning assumption, not a universal rule. Policy wording, endorsements, sublimits, and combined limits can change how extra expense is paid.
Is business income coinsurance the same as health insurance coinsurance?
No. Business income coinsurance is an insurance-to-value condition used to test whether the coverage limit is high enough. Health insurance coinsurance is usually a percentage of medical costs the patient pays after a deductible.