CP 15 20–BUSINESS INCOME PREMIUM ADJUSTMENT (REPORTING FORM)

(December 2025)

INTRODUCTION

The CP 15 15–Business Income Report/Worksheet is a valuable tool for setting a realistic business income insurance limit. Remember, it is an educated estimate since the coverage limit is based on past performance and figures to predict future income. An insured individual wanting to fully protect their hard-earned assets might select a limit high enough to cover their maximum income and ongoing expenses. However, this often leads to paying a higher premium than necessary.

The Insurance Services Office (ISO) created CP 15 20–Business Income Premium Adjustment to allow insureds to choose the highest necessary limit while paying only for the insurance they truly need. The insured can set a limit that covers a best-case scenario but pays a premium based on their actual exposure.

ELIGIBILITY

This endorsement can be used for any risks covered by the business income coverage forms CP 00 30 and CP 00 32, except for three exceptions.

• Risks written subject to the Business Income Agreed Value optional coverage
• Risks that include CP 15 08–Business Income from Dependent Properties–Broad Form
• Risks that include CP 15 09–Business Income from Dependent Properties–Limited Form

COINSURANCE

This endorsement specifies coinsurance percentages ranging from 50% to 125%. A penalty may be imposed if the coverage limit at the time of a covered loss is insufficient. However, such penalties are less likely if the chosen limit correctly reflects the maximum potential loss. The endorsement recommends the insured to regularly review their insurance limit in relation to their actual income or earnings and to increase it if needed to ensure adequate coverage.

IMPACT OF THE BUSINESS INCOME PREMIUM ADJUSTMENT (REPORTING FORM) ENDORSEMENT

Using this endorsement does not change any coverage terms. It provides an alternative insurance approach based on value, paying only the premium that reflects that value. The insured pays a deposit or an estimated premium for the entire policy period, based on the chosen coverage limit.

At policy expiration or cancellation, the insured reports actual income and ongoing expenses for the period. The premium is then adjusted to match these actual figures. If the actual figures are lower than the estimates, a refund is issued. If they exceed the estimates, no additional premium is charged, as the policy does not provide additional coverage.

LIMIT OF INSURANCE

The insurance company will not pay more for a covered loss in any single incident than the smallest of the following:

1. The insurance limit for business income coverage listed on the declarations.
2. The amount of loss after applying the Additional Condition–Coinsurance, as detailed in the Business Income Coverage Form.
3. The estimated net income that would have been earned and the ongoing expenses for the 12 months after the loss are calculated as if no loss occurred. This estimate is then multiplied by the business income coinsurance percentage shown on the declarations. This calculation is not a coinsurance penalty; it only establishes the maximum insurance limit. If the coinsurance percentage is 125%, this limit does not apply.
4. Divide the most recent reported values for Net Income and operating expenses by their actual values for that period, then multiply the result by the amount of the loss.

Example: Phil’s Photo limit of insurance is $250,000. He selects the 125% coinsurance option. He reported $200,000 in actual net income and operating expenses. Phil sustains a covered loss in the amount of $75,000.

Scenario 1: Phil’s actual reported net income and operating expenses were $200,000. There is no coinsurance penalty in this case because he was required to have $250,000, and he did.

He is paid the least of:

1. $250,000
2. $75,000 (250,000/250,000 X 75,000)
3. Not applicable because of the 125% coinsurance
4. $75,000 ($200,000/200,000 X 75,000)

Scenario 2: Phil’s actual net income and operating expenses were $225,000. There is no coinsurance penalty in this case because he was required to have $250,000, and he did.

He is paid the least of:

1. $250,000
2. $75,000 (250,000/250,000 X 75,000)
3. Not applicable because of the 125% coinsurance
4. $66,667 ($200,000/225,000 X 75,000)

REPORTING PROVISIONS

To use this endorsement, the named insured is required to submit the Business Income Report/Work Sheet—CP 15 15, detailing the values for business income and extra expenses.

Reports must be submitted as follows:

• The first report is due on the effective date of the endorsement, and the values must cover the previous 12 months of business operations.
• No later than 120 days after each new 12-month period, and the values must cover the most recent 12-month period.
• No later than 120 days after the coverage provided ends or is cancelled for the period of coverage starting at the end of the previous 12-month report.

FAILURE TO SUBMIT REPORTS

If the Business Income reports are not submitted when due and as required by the insurance company, or if coverage is canceled, the endorsement terms will no longer apply, and the premium will not be adjusted.

PREMIUM ADJUSTMENT

• The initial premium paid is an estimated deposit or advance premium. The insurance company determines the final premium at the end of each policy period. The final premium is based on the submitted net income and operating expense reports.
• If the adjusted premium is less than the deposit premium, the insurance company will refund the difference to the named insured.
• No changes are made if the adjusted premium is higher than the deposit; in such cases, the deposit premium is considered the final premium.