CP 15 15–BUSINESS
INCOME REPORT/WORKSHEET
(December 2025)
The Insurance Services
Office (ISO) CP 15 15–Business Income Report/Worksheet is required when
selecting the Agreed Value Option or when attaching the Premium Adjustment Form
to any Business Income Coverage forms. Its use for other reasons is optional. Businesses
with coinsurance-based business income coverage should consider completing this
form to evaluate their operations and determine suitable insurance limits.
Any inventory valuation
method, such as Last In, First Out (LIFO), First In, First Out (FIFO), or
another accepted approach, may be used provided it is applied consistently to
both beginning and ending inventories.
If the Agreed Value Option is chosen, the named
insured or a qualified representative must certify the worksheet is accurate.
Entries for the total agreed value and the desired coinsurance percentage must
also be included.
When CP 15 20–Business
Income Premium Adjustment is attached, it serves as both the initial worksheet
and the final report. The named insured submits the initial worksheet to the
insurance company when CP 15 20 is first attached, as it serves as the basis
for calculating the initial premium. The insured must then provide the final
report to the insurer within 120 days after coverage ends or is canceled. This
final report is used to finalize the premium calculation.
Related Article: CP 15
20–Business Income Premium Adjustment (Reporting Form)
The worksheet allows
for a two-part analysis.
·
The
first column (Ending) is for recording income and expenses for the most recent
12 months, and ending at the coverage start date or the latest policy
anniversary, whichever comes last.
·
The
second column (Beginning) is for estimating income and expenses for the next 12
months following the initial period.
Each set of columns
includes non-manufacturing and manufacturing operations.
·
ISO
describes non-manufacturing operations as those mainly involving the sale or
storage of goods and/or merchandise, or primarily providing services.
·
Businesses
using machinery for packing, shipping, minor repairs, or altering goods are
classified as non-manufacturing, provided these activities are incidental to a
primarily non-manufacturing risk.
·
Both
manufacturing and non-manufacturing columns can be used if the named insured is
involved in both types of operations.
The Business Income
Report/Work Sheet Financial Analysis section has 12 steps, labeled A through L.
·
The
current 12-month values should be entered into the “Ending” period or the first
set of columns.
·
The
estimated values for the upcoming 12-month period should be entered into the
“Beginning” period columns or the second set of columns.
All calculations begin
with gross sales, with subsequent steps involving subtracting from or adding to
this amount.
This relates only to
manufacturing risks. The starting inventory of finished stock for the period is
subtracted. This value is calculated based on the sales price, not the
insured’s cost.
This relates only to
manufacturing risks. The finished stock inventory at the end of the period is
then added in the calculations. This amount is determined by sales value, not
the named insured’s cost.
This relates only to manufacturing
risks.
|
Example:
Harvey’s Products calculates its
business income exposure for the past year. ·
Gross sales from
January 1, 2025, to January 1, 2026, totaled $1,000,000. ·
The finished
inventory totaled $125,000 on January 1, 2025, and decreased to $25,000 by
December 31, 2025. Ø $125,000 of the sales came from inventory already
produced; this amount must be subtracted. Ø $25,000 of inventory produced during the period but
not yet sold should be added back, as it was part of the production year.
The projection for 2026 indicates a 15% rise in
gross sales, with the final finished inventory anticipated to reach $25,000. ·
Projected 15%
growth expected; $900,000 x 15% ($135,000) = $1,035,000. ·
Estimated
inventory of $25,000 at both the beginning and end of the year equals
$25,000. ·
Total Estimated
Gross Sales for 2025 = $1,150.00 The estimated
gross sales for 2026 are $1,150,000, with no deductions, since the starting
and ending inventories are both $25,000. |
All of these are
deducted because they do not continue during a business interruption.
Non-manufacturing risks are recorded in
Net Sales, which is the difference between A. and E.
|
Example:
Gloria’s Florist calculates its
business income exposure for the past year. ·
Step A. Gross
sales for June 1, 2024, to June 1, 2025, were $1,000,000. ·
Prepaid Freight
does not apply. ·
However, the
following do apply: o $75,000 in returns and allowances o $25,000 in discounts o $50,000 in bad debts and collection expenses ·
Adding the costs
above results in a total of $150,000. This results in the gross sales from Step A
($1,000,000) being reduced by $150,000, leading to Net Sales of
$850,000. The estimate is that gross sales will increase by
15%, and deductions will stay the same as last year. Therefore, the net
sales estimate for the next year is $1,000,000. 1,000,000 x .15 increase in sales = $1,150,000 -
$150,000 deductions = $1,000,000 Net Sales for new term. |
Manufacturing risks are included in Net
Sales Value of Production, which is the difference between D and E.
|
Example:
Continuing
the Harvey’s Products example above: Harvey’s has: ·
$10,000 in prepaid
freight ·
$10,000 in returns
and allowances ·
$25,000 in
discounts ·
$5,000 in bad
debts and collection expenses. Adding the costs above results in a total of
$50,000, which is then deducted from the $900,000 Gross Sales of Production
in Step D. As a result, the Net Sales Value of Production is $850,000.
Harvey’s estimates these deductions will remain the
same in the upcoming year, so the $50,000 is deducted from the projected
$1,150,000, resulting in a total Net Sales of Production of $1,100,000
for the new term. |
Other earnings received
are entered in this section.
Examples include:
·
commissions
·
rental
income
·
discounts
received from suppliers
·
similar
or related revenue
However, this section
does not include investments or rental income from properties not covered in
the insurance coverage.
|
Example:
Harvey’s Products earned $50,000 in
rents and $50,000 in supplier discounts. Harvey’s adds them together to
arrive at a total of $100,000. This amount is added to the Net Sales Value of
Production, resulting in a Total Revenue of $950,000. ($850,000 Net Sales Value of Production + $50,000
rents + $50,000 discounts = $950,000) Harevey’s estimates rents will increase by 20% to $60,000,
while suppliers’ discounts will shrink by 10% to $45,000, resulting in an
estimated Total Revenue of $1,205,000. ($1,100,000 estimated sales next term + $60,000
rents + 45,000 discounts = $1,250,000) |
|
Example:
Gloria’s Florist earned $25,000 in commission, $50,000 in rents, and $25,000
in supplier discounts. Gloria’s adds this total amount of $100,000 to its Net
Sales. As a result, the Total Revenue is $950,000. ($850,000
+ $25,000 commissions + $50,000 rents + $25,000 discounts = $950,000) Gloria’s estimates commission will increase to
$30,000, rents will decrease to $25,000, but there will be no change in
supplier discounts. The estimated Total Revenue is $1,080,000. ($1,00,000 +
$30,000 commission + $25,000 rents + $25,000 discounts = $1,080,000)
|
The values of the
following five categories are treated as deductions:
This amount is calculated and analyzed in the Supplementary section.
This refers to services provided by outsiders that do not continue under
contract after a covered loss occurs.
Manufacturing risks can deduct these expenses using CP 15 11 — Power,
Heat, and Refrigeration Deduction. This is applicable only if the manufacturer
is not contractually obligated to continue them after a loss.
This represents a substantial amount in every operation. There is an
option to either exclude all ordinary payroll expenses entirely or limit them
to a specified number of days. This is achieved through CP 15 10–Payroll
Limitation or Exclusion.
These are calculated in the Supplementary Section, and an analysis is
provided below.
The items in I. Deduct are subtracted
from H. Total Revenues.
|
Example:
Harvey’s Products determines the following for the
previous 12 months: ·
cost of goods sold
is $300,000 ·
value of services
purchased is $50,000 ·
Harvey’s does not
purchase the separate endorsements. This results in its business income exposure of
$600,000 ($950,000 - $350,000). Beginning estimates for the next 12-month period: Harvey’s estimates the following: ·
cost of goods sold
at $345,000 ·
services value at
$52,500 This results in an estimated business income
exposure of $807,500 ($1,205,000 - $397,500). |
|
Example:
Gloria’s Florist determines the following for the
previous 12 months: ·
cost of goods sold
is $500,000 ·
value of services
purchased is $75,000 ·
ordinary payroll
exclusion, which excludes payroll of $150,000 This results in an estimated business income
exposure of $225,000 ($950,000 - $725,000). Beginning estimates for the next 12-month period: Gloria’s estimates the following: ·
cost of goods sold
is $525,000 ·
value of services
is $86,250 ·
ordinary payroll
exclusion, which excludes payroll of $175,000 This results in an estimated business income exposure of $468,750
($1,080,000 - $611,250).
|
This entry applies to both manufacturing and non-manufacturing
businesses. In this step, operations from both are combined.
These expenses are included in the estimate
only because they are considered as extra limits in the event of a loss. They
will not be factored into any business income coinsurance calculation.
The additional costs that might be necessary to prevent business
suspension and keep operations running should be identified.
Related Article: Extra Expense
Worksheet
These options are only useful if there are remaining coverage limits
after paying for a business income loss. It is necessary to determine how long
it will take to restore the revenue level prior to the loss.
|
Examples:
|
|
Examples:
·
Harvey’s
Products estimated 12-month business income
exposure is $807,500. It must now determine the applicable coinsurance
percentage and the corresponding insurance limit. ·
Gloria’s Florist
estimated 12-month business income exposure is $468,750, with an additional
expense exposure of $50,000 and $25,000 allocated for an extended indemnity
period. The total exposure sums to $543,750. The next step is to determine the correct
coinsurance percentage and insurance limit. The coinsurance calculation for
Gloria’s is based on $468,750, as the additional expenses and extended
indemnity are not included in this calculation. |
Calculating the cost of
goods sold consists of the following three steps:
1. Inventory at the
beginning of the year
Manufacturing risks
include the value of raw materials and work-in-process stock, but not finished stock. The entire inventory
of non-manufacturing risks is included.
The following items are
added to this figure:
·
Cost of raw materials, including shipping costs. This applies
only to manufacturing risks.
·
Cost of factory supplies used in manufacturing operations.
This applies only to manufacturing risks.
·
Cost of goods sold, including transit fees. This refers to
the cost of goods sold that are not manufactured.
·
Cost
of other supplies used in manufacturing, including transit fees.
2.
Cost of goods available
for sale
This is the total
inventory and all items listed above. Inventory at year-end is subtracted from
this figure. Manufacturing risks include raw materials and work-in-process but
exclude finished goods.
3.
Costs of goods sold
This figure is entered
in Step I. in the primary calculation section above.
All royalties not
specifically covered should be listed.
NOTE: An endorsement
covering royalties is not available. Therefore, they must be included in the
declarations or added through a manuscript endorsement.
The formula for special
mining deductions is as follows:
1. Actual depletion (also
referred to as unit cost or cost depletion). It is not a depletion percentage.
2. Welfare and retirement fund charges (based on tonnage).
3. Hired trucks.
4.
Add the limits from Steps 1. through 3. This sum
becomes the Special Mining Deductions and is then entered into Step I. of the
primary calculation section above.