The Complete Guide to Business Income Insurance in 2025

Business income insurance helps cover lost revenue and ongoing expenses when your business can’t operate due to a covered event like fire damage, vandalism, or a natural disaster. Also called business interruption insurance, this coverage acts as a financial safety net that keeps money flowing even when your doors are closed.^[1]

For small businesses operating on tight margins, business income insurance can mean the difference between weathering a temporary setback and closing permanently. Here’s what you need to know about what business income insurance covers, how it works, what it costs, and whether it’s right for your business.

Business Income Insurance Explained

Business income insurance compensates you for income loss when your business operations stop due to covered property damage.^[2] This coverage typically comes as part of a commercial property insurance policy or business owners policy (BOP), which bundles multiple protections into one policy.

Business owners policies often include property coverage, liability coverage, and business interruption coverage.^[3] Depending on your industry and risks, you might also need commercial auto insurance, professional liability insurance, or workers’ compensation.

How Business Income Insurance Works

If a covered peril damages your business property and forces you to close, business income insurance reimburses your lost revenue and helps pay operating costs during the restoration period.

Most policies include a waiting period — typically 48–72 hours after the loss event — before coverage begins. This deferred period effectively acts as a time deductible, meaning the coverage won’t apply to those first hours.

Some policies also offer contingent business interruption coverage, which pays when a supplier or key customer experiences a covered loss affecting your revenue.

To get a payout from a claim, you must prove the loss resulted from a covered event and show the service interruption directly caused your income loss.^[4] For example, if storm damage floods your retail store and forces a two-month closure, business income insurance would reimburse lost sales and cover rent, payroll, and loan payments during repairs.

What Business Income Insurance Covers

Business income insurance protects your cash flow when covered property damage forces you to suspend operations. The policy replaces revenue you would’ve earned and covers expenses that continue even while your doors are closed.

Here’s what business income insurance typically covers:

• Lost income: Replaces the net profit and revenue your business would’ve generated during the closure period.

• Continuing expenses: Covers ongoing operating costs that don’t stop when you close, like utilities, equipment leases, and professional services.

• Payroll: Pays employee wages and benefits so you can retain your workforce during the interruption.

• Rent or mortgage payments: Ensures you can meet your lease or property loan obligations.

• Taxes and loan payments: Covers business taxes and debt service that remain due regardless of your operating status.

• Extra expenses: Reimburses costs to minimize the interruption, such as renting temporary space or expedited equipment delivery.

• Extended business income: Continues coverage beyond reopening to help you regain your pre-loss revenue level.

• Dependent property losses: Compensates for income lost when damage to a supplier, customer, or neighboring property disrupts your business.

Coverage	Triggering Event
Lost income	A kitchen fire forces a restaurant to shut down.
Continuing expenses	A burst pipe closes a retail shop, but utility bills and equipment leases still come due.
Payroll	A manufacturing facility shuts down due to storm damage, and the owner needs to keep paying employees to retain staff.
Rent or mortgage payments	A salon suffers smoke damage and must close for repairs, yet the landlord still requires monthly rent.
Taxes and loan payments	A café temporarily closes after flooding, but quarterly tax payments and loan installments remain due.
Extra expenses	A chiropractor’s office rents temporary space while the damaged clinic undergoes repairs.
Extended business income	A bakery reopens, but customer traffic remains low for weeks, delaying a return to pre-loss revenue.
Dependent property losses	A car repair shop loses income when its parts supplier’s facility is damaged, delaying shipments needed to complete customer repairs.

Things business interruption insurance won’t cover

Business interruption insurance doesn’t cover every scenario that could close your business. Policies vary between insurers, so review your policy documents carefully.

These are some common exclusions:

• Pandemics and communicable diseases: Most policies exclude widespread outbreaks of illness.

• Utility failures: Power outages or service interruptions occurring off your property typically aren’t covered without specific endorsements.

• Undamaged property: If authorities order closures but your property isn’t physically damaged, standard policies won’t pay.

• Cyber incidents: Digital disruptions usually require separate cyber insurance.

Business Income Insurance Policy Options

Just as you can customize home, auto, and life insurance through riders, you can enhance business income insurance with optional endorsements to address specific risks.

Available policy options include:

• Extended business income: Extends coverage beyond your property’s physical restoration to account for the time needed to return to normal revenue levels.^[5]

• Electronic vandalism extension: Covers losses from digital attacks or damage to your computer systems, protecting against technology-dependent business interruptions.

• Business income for dependent parties: Expands contingency coverage to include losses when damage to suppliers, manufacturers, or major customers disrupts your cash flow.

• Extension for off-premises utility services: Adds coverage for business interruptions caused by failures at utility company facilities, covering power, water, and internet outages originating beyond your property.

Understanding How Much Business Interruption Insurance You Need

Calculating coverage needs requires understanding your monthly operating costs and revenue. Here are some steps you can follow:

1. Calculate average monthly revenue by reviewing financial statements from the past 12 months.

2. Add up fixed monthly expenses: rent, payroll, loan payments, taxes, utility bills, and insurance premiums.

3. Estimate restoration time for common disasters in your area; between three and 12 months is typical.

4. Multiply monthly expenses and lost profit by the estimated recovery time.

5. Add a buffer for extra expenses during recovery.

Here’s a simple example for a small retail business:

Expense Category	Monthly Amount
Rent	$3,000
Payroll	$8,000
Utilities	$500
Loan payments	$1,500
Average profit	$4,000
Total monthly need	$17,000
6-month coverage	$102,000

Business Income Insurance Costs

Business interruption insurance typically costs between $40 and $130 per month. This translates to annual premiums ranging from $480 to $1,560, depending on your business size and risk factors.

Insurers calculate premiums using your annual revenue and the fixed costs you’d still pay during a closure.

Factors that affect business income insurance costs

Several factors influence your business income insurance premiums, including:

• Business revenue: Higher-revenue businesses pay more because they have greater potential losses.

• Industry and associated risks: Restaurants with open flames and heavy equipment pay significantly more than office-based businesses due to higher risks of fire damage and property loss.

• Property value: Valuable business property or equipment increases premiums, since the insurer faces greater financial exposure.

• Location and environmental risks: Businesses in areas prone to natural disasters, theft, or vandalism face higher premiums due to increased perils.

• Claims history: Past claims signal higher risk, resulting in increased premiums for future coverage.

Remember, it’s a good idea to get quotes from multiple insurers and compare monthly premiums against how much income the policy would cover.

How to Buy Business Income Insurance

Most small businesses purchase business income insurance as part of a business owners policy, which bundles it with property insurance and liability coverage at a discounted rate. If you don’t qualify for a BOP, you can add business interruption insurance as an endorsement to your commercial property insurance.

Follow these steps to buy business income insurance:

1. Calculate your monthly operating costs and typical revenue to determine coverage needs.

2. Request quotes from at least three insurers to compare premiums and coverage terms.

3. Review policy language carefully, checking exclusions, waiting periods, and restoration periods.

4. Work with an insurance agent to customize your policy with needed endorsements.

5. Submit your application with the required documentation about your business operations and finances.

6. Review coverage annually and adjust limits as your business grows.

Business Income Insurance FAQs