Monthly income replacement after your company has a covered property loss

Business income insurance, sometimes called business interruption insurance, is a type of insurance coverage that’s often added to or included on commercial property insurance policies. It’s designed to provide income replacement money to your business if you have to temporarily shut your doors due to a covered loss.  

Yes, it’s as good as it sounds. Business income insurance could make the difference between being able to keep your business afloat or forcing it to close if you experience a loss, such as a fire. The money you receive can be used to pay employees, pay vendors and order supplies, or anything else that you need to use it for to keep your doors open. 

Business Income vs. Extra Expense

On many small business insurance policies, business income coverage is often automatically included. It’s often paired with something called Extra Expense coverage, though the two are different. 

Business income is essentially a monthly check in the mail that gives you a percentage of your business’ previous income, before you had a loss. The percentage will depend on the type of insurance policy you have, with smaller businesses often able to obtain 100% of their income on a monthly basis. It’s designed to keep your revenue coming in like it never went away. 

Extra expense coverage will pay the added cost you might have to incur if you need to temporarily move or alter your business. For example, if you’re a restaurant and you need to rent a new place while your old building is being rebuilt, extra expense coverage would kick-in if your rent or supplies cost more due to your new, temporary location. 

When Can I Use Business Income? 

Business income coverage is designed to be used after your business experiences a loss that’s covered by your commercial property insurance form. It’s mainly a commercial property insurance type of coverage, which means it wouldn’t kick-in if you experience a commercial auto loss, liability loss, or any other type of loss that is covered under a separate insurance policy. 

Business Income and COVID-19

When COVID-19 hit, many businesses were expecting to be able to collect business income coverage after they were forced to close. However, insurance companies took a stance early on that the pandemic wasn’t a covered cause of loss in their policies, since it didn’t cause direct physical loss. 

Some companies choose to fight this stance in the courts, but it’s likely to be an unresolved issue for quite some time. From an insurance company’s standpoint, they might not be able to afford having all of their commercial clients submit business income claims at the same time, which is partly the reason why pandemics aren’t normally covered. Most policies also included an exclusion for Virus or Bacteria which has now been updated to Communicable Disease. 

Key Takeaway

Business income coverage replaces your company’s lost income after you experience a covered insurance loss, such as fire, wind and tornados, or theft. It normally only applies to commercial property insurance, meaning other types of claims wouldn’t be covered by business income. It’s an important, and sometimes automatically included coverage that could keep your business afloat after a claim.