What is business income insurance?
Business income and extra expense coverage helps pay for lost income and other costs, like rent, loan payments, payroll, taxes, and temporary relocation. It's also called business interruption insurance and is available through the commercial property coverage on a business owners policy (BOP).
How does business income insurance coverage work?
Business income insurance works by protecting you from unexpected financial losses if your business is forced to close unexpectedly.
For example, if you run a café, and a tornado damages your storefront, furniture, and flooring, your coverage would kick in after a short waiting period and last until your café is up and running again. The waiting period can be anywhere from 24 to 72 hours after the event, depending on your policy.
The time it takes to get your business back in operation, whether through repair or relocation, is called the restoration period. This period can vary, but insurers will expect it to be done as quickly as possible.
What does business income insurance cover?
Loss of income insurance provides you with the net income you lose when your business is unexpectedly disrupted due to a covered event. A covered event may be theft, fire, or wind damage to your business property that prevents you from conducting normal business.
Net income is the profit you would have earned if your business was in operation. To calculate your net income, the insurance company relies on your records, so it's important to maintain accurate bookkeeping and safeguard your information in case your physical business location is compromised. Any lost income that is undocumented won’t be covered.
Extended business income
Extended business income is coverage that can pay for income loss after your business has reopened and you're still in the rebuilding process. Sixty days of extended income is included in a BOP underwritten by Progressive Commercial, but some insurers may have a shorter period or offer it as optional coverage.
What won't business income loss insurance cover?
Most business owners policies have some exclusions, such as government actions and epidemics. Damage caused by floods and hurricanes may also be excluded, but you can potentially add protection to your policy via endorsements.
Business income insurance also won't cover disruptions caused by utility outages or negligence. That means if you have to close because of a prolonged power outage or something you could have prevented, business income coverage won't be able to help.
Understand your coverage limits
It's important to know your business income and extra expense coverage limits. Review your policy to understand your maximum insurance amount and how long the restoration period is. This step will help you prepare for potential disruptions and ensure you have the right protection in place.
How much does business income coverage cost?
The cost of business income insurance varies. Rates are based on numerous factors, including the amount of coverage you need, your industry or profession, and the size of your business. Talk to one of our experts for help finding the right amount of coverage for your business.
Do I need loss of earnings insurance?
Many businesses benefit from this coverage. A BOP includes both lost income and extra expense insurance as part of business interruption coverage. If you have a physical location, these protections can be an important part of financially securing your company.
Businesses that could benefit from this coverage include:
Our business insurance experts can help you understand how a BOP with business interruption works. Contact us today, or start a quote for coverage tailored to your business.
Common questions about business income coverage
Will business income coverage help if my partners or suppliers have a business disruption?
If you have the correct business income endorsements, you can cover disruptions to external groups that your business relies on. For example, a contingent business interruption would cover a supplier who can't deliver needed materials because of a covered event at their property, like a fire.
Do I have to pay a deductible for a loss of income claim?
It depends. Business interruption insurance typically has what's called a time-based deductible. When you file a claim, there will be a waiting period of 24–72 hours before lost income coverage begins. Read through your policy or talk to an expert to see if you also need to pay.
Does business insurance cover loss of income?
To recoup lost income, you need business interruption insurance. A BOP policy with Progressive Commercial includes this coverage and will pay for lost income if your business is disrupted by a covered risk.
How do I know if I have business income coverage?
Review your policy documents. This coverage is automatically included in a BOP underwritten by Progressive Commercial, but it may be an optional coverage with other carriers. If that's the case, look for an endorsement or add-on called extended business income or extended losses.
