Business income coverage (also called business interruption insurance) helps replace lost income when your operations are disrupted by a covered cause of loss, such as a fire or certain types of property damage. It is designed to help your business pay ongoing expenses and stay afloat while you repair or rebuild.
What is Business Interruption?
Business interruption coverage is an add-on or component of a commercial property policy. Instead of paying for physical damage to your building or equipment, it focuses on the financial impact of a covered shutdown. The goal is to help your business return to its normal financial position as closely as the policy allows.
This coverage usually applies only when there is direct physical loss or damage to covered property from a covered peril, and when that loss forces you to slow or stop operations.
Who Needs It
Many types of businesses can benefit from business income coverage, including:
- Retail stores and restaurants that rely on daily customer traffic
- Professional offices such as medical, legal, or accounting practices
- Manufacturers and wholesalers that depend on key equipment or facilities
- Contractors, service providers, and home-based businesses with steady income streams
If your business would struggle to pay rent, payroll, or loan payments during an unexpected shutdown, business income coverage may be important to consider.
What It Typically Covers
Specific coverage will depend on your policy, but business income insurance often helps with:
- Lost net income that you would have earned if no loss had occurred (subject to policy terms)
- Ongoing operating expenses such as rent, utilities, and some payroll costs
- Relocation expenses if you temporarily move to continue operations, when covered
- Extra expense coverage to pay reasonable additional costs to reduce the period of interruption
Coverage usually applies during a defined “period of restoration,” beginning after a waiting period and ending when the property should reasonably be repaired or replaced.
Common Exclusions and Limitations
Business income coverage has important exclusions and limits. Examples may include:
- Losses not caused by a covered peril under your property policy
- Utility failures or off-premises power outages, unless specifically added
- Losses from wear and tear, maintenance issues, or gradual deterioration
- Governmental actions, ordinances, or certain civil authority events, unless covered by an endorsement
- Income losses beyond the policy’s coverage limit or time limit
Policy language varies by insurer and state. Review your specific policy and speak with a licensed insurance professional about what is and is not covered.
Factors That Influence Cost
The cost of business income coverage can be affected by several factors, including:
- The type of business you operate and your industry risk profile
- Your revenue, payroll, and typical operating expenses
- The location, age, and construction of your building
- Fire protection, security, and other safety features
- The coverage limits, waiting period, and optional endorsements you choose
Insurers may also look at your claims history and how dependent your operations are on specific equipment, suppliers, or locations.
Proof of Insurance and Compliance
Landlords, lenders, or business partners may ask for proof that you carry business income or business interruption coverage as part of your commercial insurance package. This is often provided in the form of a certificate of insurance or policy declarations page.
Insurance requirements can vary by state, contract, and industry. Check your lease, loan documents, or vendor agreements, and consult a licensed insurance professional to understand what coverage is appropriate for your situation.
How to Get a Quote
To explore business income coverage options, gather basic information about your operations, including annual revenue, number of employees, and details about your location and property. An insurance professional can help you estimate how long it might take to recover from a major loss and suggest coverage limits that align with your risk tolerance.
For a customized business insurance quote, including business income coverage options, request a quote online and review available policies with a licensed agent or broker.
Read more about this type of coverage for multiple types of businesses, on our Business Income Coverage page.
Frequently Asked Questions
Does business income coverage replace all of my lost profits?
Business income coverage is designed to help replace lost income and certain ongoing expenses during a covered interruption, up to your policy limits and subject to the policy’s terms. It does not guarantee full replacement of all profits or every type of financial loss.
Do I need property insurance to have business income coverage?
Business income coverage is usually tied to a commercial property policy or a business owners policy (BOP). In most cases, there must be covered physical damage to insured property before business income coverage applies.
Is payroll covered under business interruption insurance?
Some payroll expenses may be covered during the period of restoration, depending on your policy and any endorsements you select. You may be able to choose whether to insure ordinary payroll, key employees only, or payroll for a limited time.
Will business income insurance cover supply chain disruptions?
Standard business income coverage usually focuses on losses from damage at your insured premises. Coverage for dependent properties or key suppliers typically requires specific endorsements and may not be available in all situations.
How long does business income coverage last after a loss?
The coverage period is defined in your policy and often runs from the end of any waiting period until the property should reasonably be repaired or replaced, or operations resume, subject to any maximum time limits stated in the policy.
Still have questions? Talk to a local insurance expert.