Business income coverage

Business income insurance coverage helps small business owners when they shut down after an unforeseen mishap such as fire, vandalism, or weather event.

It also covers government-ordered shutdowns, such as what happened during the coronavirus pandemic, or an evacuation order during a natural disaster.

If your business had to shut down after a fire, your commercial property insurance policy would cover the cost of repairing your building, replacing equipment, and lost inventories. It would not cover your income loss during the disruption.

Business income coverage would offset your loss of business income and could help your business survive during the length of time it takes for you to resume operations—known as the period of restoration.

Business income insurance covers your loss of revenue during a business shutdown from a covered event, including a direct physical loss such as fire, theft, and wind damage.

It provides an extra layer of financial support that can help your business stay afloat while you repair and recover from the property damage to your business.

If your business had to close for a while because of theft or vandalism, your commercial property insurance would cover your business property and physical assets. An income insurance policy would cover your loss in sales revenue while you’re closed for repairs.

Imagine a windstorm damaged the roof of your building, resulting in extensive water damage to your business, and forced you to close for a while.

Your commercial property insurance would cover the physical damage to your business property, such as repairing the roof, and replacing damaged property and equipment. Your property insurance would not cover your lost income while your business was closed.

Business income insurance would help offset that revenue loss while you recover, because the windstorm would be a covered cause of loss under your policy. Policies typically don’t have a deductible, though they may have a waiting period before you can collect on any covered claims, typically, from 24 to 72 hours.

Your period of indemnity, or how long your coverage lasts, usually ends as soon as your business reopens. Though, you might be able to add extended business income coverage to a policy. This would cover your income losses for a period of time after reopening, such as 30 days.

All your business income losses must be documented, so it’s important to keep your receipts and accounting data that demonstrate what your income would be if your business was still open.

The insurance company may ask to see your:

• Income tax returns
• Sales records and receipts
• Profit and loss statements
• Payroll records

The more risks your business faces, the higher your premiums are likely to be.

For example, businesses that rely on foot traffic for their income, such as food and beverage businesses, can expect to pay more in premiums because they face more risks than low traffic business like consulting businesses.

Fortunately, business income insurance is scalable. You can choose how much coverage you need for your business income limit, and weigh this against what you can afford in premiums.

Extra expense coverage is optional coverage that covers your non-ordinary expenses after a business disruption.

Whereas business income insurance covers your lost revenues after an incident, extra expense coverage is for your additional costs such as buying or leasing equipment, moving your business to a temporary location, or paying overtime to your employees because of the mishap.

You can buy extra expense insurance as a separate policy, as a rider to your commercial property insurance, as an inclusion to your business interruption insurance, or as part of a business owner’s policy (BOP).

Business income insurance only covers an actual loss of business income. It does not cover certain operating expenses, such as advertising and marketing campaigns, or any income loss that isn’t documented.

It also wouldn’t cover an income loss if your business was still allowed to operate during a pandemic or weather event, or if you closed your business because of staffing problems arising from such incidents.

Your income insurance coverage would also exclude losses from downed electric lines and power outages, or natural disasters and extreme weather events that would be covered by a different policy, such as flood insurance.

Complete Insureon’s easy online application today to compare insurance quotes from top-rated U.S. insurers. You can also consult with an insurance agent on your business insurance needs. Once you find the right types of policies for your small business, you can begin coverage in less than 24 hours.