Your Business May Be Closed. Your Bills Usually Aren’t.
A covered property loss can do more than damage a building, equipment or inventory. It can interrupt the normal flow of your business and make it harder to bring in the revenue you rely on every day.
That’s where business income insurance, often referred to as business interruption insurance, can become an important part of a commercial insurance program. Depending on the policy, coverage may help address certain income losses and continuing expenses when a covered property loss prevents your business from operating normally.
How Does Business Income Insurance Work?
Think of it as a financial bridge between a covered interruption and getting your business operations back on track.
A Covered Loss Happens
Your business experiences direct physical loss or damage caused by a covered peril under the applicable policy.
Operations Are Interrupted
The covered property loss causes your business to slow down, temporarily close or operate somewhere else.
Covered Income Loss Is Evaluated
The policy’s business income provisions determine what eligible income losses and continuing expenses may be considered.
You Work Toward Normal Operations
Coverage can help address eligible losses during the applicable period of restoration, subject to the policy.
What Can Business Income Coverage Help With?
Depending on the policy, business income coverage may address certain financial losses associated with an interruption caused by covered property damage.
Lost Business Income
Coverage may help replace certain eligible income your business would have earned if the covered interruption had not occurred.
Continuing Expenses
Certain normal operating expenses may continue even while your business is temporarily unable to operate normally.
Payroll Considerations
Depending on the policy, certain payroll expenses may be included when calculating covered business income losses.
Extra Expenses
Some policies offer extra expense coverage for certain additional costs incurred to help continue or restore business operations.
What About Extra Expense Coverage?
Sometimes the best way to keep a business moving is to spend a little more money to keep the doors—or the digital equivalent of the doors—open.
Depending on the policy, extra expense coverage may help with certain additional costs you incur to continue operating or reduce the length of an interruption following a covered loss.
Certain costs associated with operating temporarily elsewhere may be eligible.
Additional equipment or services may sometimes be needed to keep operations going.
Certain expenses may help shorten the period of interruption.
Extra expense coverage is not automatically included in every policy and is subject to the applicable policy terms, conditions, limits and exclusions.
A Simple Business Interruption Example
Imagine a Texas business suffers significant fire damage from a covered cause of loss. The building needs repairs, equipment needs attention and the business cannot operate normally for a period of time.
Without business income coverage: the business may still have expenses while revenue takes an unwanted vacation.
With applicable business income coverage: the policy may help address eligible income losses and continuing expenses resulting from the covered interruption, subject to the policy.
This is only an example. Actual coverage depends on the specific policy, covered cause of loss, limits, conditions, exclusions and circumstances of the claim.
Business Interruption Coverage Usually Starts With a Covered Property Loss
One important thing to understand about business interruption insurance is that it is not simply a general “my business lost money” policy. Coverage generally depends on the underlying property loss and the specific wording of the policy.
Texas Department of Insurance guidance explains that business interruption insurance generally covers financial losses when a company cannot do business because of direct physical loss of or damage to its property by a peril covered by the policy.
What About Other Types of Business Interruptions?
Civil Authority
Some business interruption policies may extend coverage when a government authority restricts access to your property because of covered damage to nearby property. Policy language matters.
Suppliers & Customers
Specialized coverage, sometimes called contingent business interruption coverage, may address certain indirect losses when covered events affect suppliers or customers.
Utility Interruptions
Utility-related losses can be subject to specific conditions, exclusions or endorsements. Don’t assume every outage automatically qualifies.
Availability and scope of these coverages vary by policy and insurance carrier.
Who Should Consider Business Income Insurance?
Business income coverage can be worth discussing if a temporary interruption could make it difficult for your business to keep up with its financial obligations.
How Much Business Income Coverage Do You Need?
This is one of those insurance questions where “just pick a number” isn’t particularly helpful.
The appropriate limit can depend on your revenue, expenses, payroll, expected recovery time and other characteristics of your business. Financial records may also be important when determining a business income loss.
Consider the income your business normally generates.
Identify expenses that continue even when operations slow down.
Think beyond the repair date and consider how long it may take to resume normal operations.
Accurate financial records can be important when evaluating an income loss.
Related Business Property Coverages
Business income coverage works alongside other commercial insurance coverages. A complete business insurance program may need several pieces working together.
Commercial Property Insurance
Protect eligible commercial buildings and business property against covered losses.
Business Personal Property
Explore coverage for eligible equipment, inventory, furniture, tools and other business property.
Business Owner’s Policy
A BOP may package eligible property and liability coverages for qualifying businesses.
Why Work With Lavon Insurance?
Independent Insurance Agency
We work with insurance carriers to help identify commercial insurance options based on your business and its specific exposures.
A Human on the Other End
Business insurance can get complicated quickly. We believe having a real person to talk through the details with is still a pretty good idea.
Texas Business Focus
We help Texas businesses explore commercial insurance options that fit their operations, property and financial exposures.
Business Income Insurance FAQs
What is business income insurance?
Business income insurance, often called business interruption insurance, is designed to help address certain income losses and continuing expenses when a covered property loss prevents a business from operating normally.
Is business income insurance the same as business interruption insurance?
The terms are often used interchangeably. The exact name and coverage provisions depend on the insurance policy and carrier.
Does business interruption insurance cover lost revenue?
Business interruption coverage may address certain covered business income losses, but it does not simply reimburse every dollar of lost revenue. The applicable policy provisions determine what income and expenses may be covered.
Does business income insurance cover payroll?
Certain payroll expenses may be considered under a business income policy, depending on the policy provisions and selected coverage.
Does business interruption insurance cover a power outage?
Not necessarily. Utility interruptions can be subject to specific conditions, exclusions or endorsements. Coverage depends on the policy language and circumstances of the loss.
How much business income insurance does my business need?
The appropriate limit depends on your business income, continuing expenses, payroll considerations, expected recovery time and other factors. Your insurance agent can help review these exposures.
Keep Your Business Moving
You can’t predict every curveball business will throw at you. But you can talk through how an unexpected interruption could affect your income. Let Lavon Insurance help you explore your business income coverage options.
Get a Commercial Insurance Quote Call (972) 853-8884Insurance coverage is subject to the terms, conditions, limits, exclusions and endorsements of the applicable policy. Coverage availability, eligibility and pricing vary by insurance carrier and individual risk. This page is for general informational purposes and does not modify or replace the terms of an insurance policy.