State Farm Insurance License Practice Exam

Which policy pays for loss of income that the insured sustains due to physical loss from a covered peril?

1. General Liability Policy

2. Business Income Policy

3. Property Damage Policy

4. Standard Homeowners Policy

The correct answer is: Business Income Policy

The Business Income Policy is specifically designed to cover loss of income that an insured business sustains due to the physical loss of property from a covered peril, such as fire or theft. This type of policy helps to replace lost income that would have been earned if the business had not been interrupted, essentially protecting the business’s revenue during the recovery period. A General Liability Policy primarily protects businesses against claims of bodily injury and property damage and does not cover income loss. The Property Damage Policy focuses on covering physical damage to property itself rather than income losses due to the business interruption caused by that damage. The Standard Homeowners Policy is tailored for personal residences and may include some limited coverage for loss of rental income; however, it does not cover business income losses in the same comprehensive manner that a Business Income Policy does. Therefore, the Business Income Policy is the most appropriate choice for addressing loss of income due to physical loss from a covered peril.