Commercial property insurance covers physical damage, but business income insurance (also called business interruption insurance) covers your ongoing expenses like rent, payroll and loan payments while you're closed. Small businesses typically bundle this coverage in a business owner's policy (BOP) alongside property and liability protection. Larger businesses add it as an endorsement to their commercial property policy. Most policies include a 48- to 72-hour waiting period before coverage kicks in.
Business Income Insurance
Business income insurance replaces lost revenue when covered perils like fires, storms or vandalism force you to close temporarily.
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Updated: October 27, 2025
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Key Takeaways
If property damage shuts down your business, business income insurance keeps cash flowing to cover payroll, rent and other fixed expenses.
It covers continuing expenses and lost profits but won't cover floods or COVID-style shutdowns.
Your monthly operating expenses and recovery timeframe determine how much business interruption coverage you need.
What is Business Income Insurance?
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What Does Business Income Insurance Cover?
Your coverage depends on whether the property damage stems from a covered peril (events your policy protects against) in your commercial property policy. Business interruption usually doesn't cover damages or losses from flooding, earthquakes and mudslides, though you can purchase additional protection for these specific perils.
The following scenarios show when you're protected and when you aren't:
Fire damages your restaurant's kitchen. | ✅ | A grease fire forces Tony's Pizzeria to close for three months during kitchen reconstruction. Business income insurance covers lost revenue, employee wages and continuing expenses like rent and loan payments since fire damage is covered. |
Windstorm damages your retail store's roof. | ✅ | Hurricane winds tear off part of Sarah's boutique roof, forcing closure for repairs. Coverage applies because windstorm damage is typically covered under commercial property policies, triggering business income protection for lost sales and ongoing operating costs. |
Flooding shuts down your manufacturing plant. | ❌ | When river flooding forces Martinez Manufacturing to evacuate, standard business income insurance won't cover lost production time. Your policy doesn't cover damages or losses from flooding, but separate flood insurance may include business interruption coverage. |
Civil authority blocks access after nearby explosion. | ✅ | After a gas explosion damages buildings on Main Street, authorities cordon off the area for two weeks. Emma's Coffee Shop, though undamaged, qualifies for civil authority coverage because the triggering event (explosion) is covered, and government orders prevent access to her property. |
Vandalism forces temporary closure. | ✅ | Vandals break windows and damage inventory at Johnson's Electronics, requiring a week-long closure for cleanup and restocking. Since commercial property policies cover vandalism, business income insurance covers lost sales during restoration. |
Cyber attack shuts down operations. | ❌ | A ransomware attack paralyzes Digital Solutions Inc.'s computer systems for five days. Traditional business income insurance requires physical property damage, so cyber-related closures typically aren't covered unless you have separate cyber liability insurance with business interruption coverage. |
Power outage from equipment failure. | ✅ | An electrical transformer explosion cuts power to Industrial Park for 48 hours, forcing Metro Welding to halt production. If the power loss results from covered property damage to utility equipment, business income coverage may apply through utility services endorsements. |
Note: Coverage details vary between insurers and states. Business income insurance policies have specific terms, conditions, and exclusions that may affect your coverage. This information is for educational purposes only and should not be considered insurance advice. Review your specific policy documents or consult with a licensed insurance agent to understand what's covered in your situation
How Much Business Income Insurance Do I Need?
Business income coverage replaces lost revenue when property damage forces closure. It also covers ongoing expenses like rent and payroll while your business is shut down. How much coverage you need depends on these factors:
- 1Monthly operating expenses
Calculate your fixed costs like rent, loan payments, payroll, utilities and insurance premiums that continue even when you're closed.
- 2Average monthly revenue
Review your financial records to determine typical monthly income, accounting for seasonal fluctuations in your business.
- 3Recovery timeframe
Estimate how long it would take to repair, rebuild or replace damaged property and resume normal operations.
- 4Industry-specific risks
Consider perils common to your sector. For example, restaurants face fire risks, coastal businesses deal with hurricanes and manufacturers worry about equipment breakdowns.
- 5Location factors
Think about what kind of accidents, natural disasters or lawsuits could damage your business, especially if you're in areas prone to seasonal events like floods or wildfires.
- 6Seasonal revenue patterns
Account for peak and slow periods when determining annual coverage needs, as a closure during busy season costs more than during off-peak periods.
- 7Alternative income sources
Factor in whether you can operate from temporary locations or generate revenue through other means during restoration.
Who Needs Business Income Insurance?
While any business could benefit from protection against income loss, some face higher risks and need this coverage more than others. Different business types have varying vulnerabilities and recovery challenges:
Restaurants and food service
Kitchen fires, equipment failures and health department closures can shut down operations for weeks or months.
Retail stores with physical locations
These businesses can't generate revenue when customers can't enter due to property damage or civil authority orders.
Manufacturing companies
Equipment breakdowns or facility damage halt production, affecting immediate sales and supply chain obligations.
Seasonal businesses
Companies that generate most revenue during specific periods face catastrophic losses if disasters strike during peak seasons.
Businesses in high-risk areas
Locations prone to natural disasters like hurricanes, floods or wildfires face frequent closure threats.
Equipment-dependent operations
Medical practices, auto repair shops and printing companies rely on specialized equipment that's expensive and time-consuming to replace.
Single-location businesses
Companies without multiple locations can't redirect operations elsewhere when their primary facility is damaged.
Business Income Protection Insurance: Bottom Line
Business income insurance keeps your company financially stable during unexpected closures. While it covers lost revenue and continuing expenses from covered perils like fire or windstorms, floods and viruses require separate policies. Determine your coverage needs by calculating monthly expenses and estimating realistic recovery timeframes.
Business Income Insurance Coverage: FAQ
We've answered the most frequently asked questions about business income insurance to help you understand this essential coverage:
Do online businesses need business income insurance?
Only if you rely heavily on physical servers, equipment or office space. Cyber attacks aren't typically covered, so you'd need separate cyber insurance for that.
How much does business income insurance cost?
Costs vary based on factors like your monthly expenses, rebuild time and industry risks. Insurers calculate premiums using your annual revenue and the fixed costs you'd still pay during closure.
What documentation do I need for a business income insurance claim?
When filing a commercial insurance claim, gather your financial records showing normal earnings, receipts for expenses you're still paying while closed, proof that the damage caused your shutdown and records of any income earned during closure.
Is business income insurance required by law?
No law requires it, but lenders or landlords often make it a loan or lease requirement. This optional coverage protects your finances when covered damage forces closure.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
He writes about economics and insurance, breaking down complex topics so people know what they're buying.