Could your business afford to pay employees if disaster struck tomorrow?
When a fire, burst pipe, or other covered event shuts down your operations, the bills don’t stop coming. Rent, payroll, and loan payments keep running even when your doors are closed. That’s where Business Income Coverage steps in, it helps keep your business (and your team) afloat while repairs happen.
As Chris Mitchell puts it:
“Business income coverage isn’t just about protecting your building – it’s about protecting your people. It’s the difference between a temporary setback and a permanent closure.”
What Business Income Coverage Actually Does
This essential coverage replaces lost income after a physical loss, such as a fire or severe storm and pays for ongoing expenses until your business can reopen. It ensures that your employees continue receiving paychecks, your rent and loan obligations are met, and your business can recover without crippling financial strain.
Business income coverage is often paired with extra expense cover, to cover things like renting a temporary workspace, buying or leasing new equipment, or running advertising to let customers know you’re back open.
Example: A small restaurant in Denver faced a kitchen fire that forced them to close for six weeks. Their Business Income Coverage covered lost revenue, staff wages, and the cost of operating a temporary catering service — helping them stay solvent until reopening.
Why Some Businesses Still Face Unexpected Risk
Even with coverage, many business owners underestimate how much they need:
- Limits may not cover full payroll, especially for seasonal or “key” employees.
- Dependent or contingent property risks (e.g., damage at a critical supplier or tenant) may not be covered unless specifically added.
- The trigger is usually physical damage meaning events such as cyberattacks or pandemics may not be covered by default.
Adding urgency to this: according to recent data highlighted by Federal Emergency Management Agency (FEMA)1, approximately 40 % of businesses never reopen following a disaster, and another 25 % close within a year. These statistics underscore the importance of having strong business continuity protection because rebuilding the business is often harder than rebuilding the property.
What It Doesn’t Cover
Business income coverage typically applies only to losses from physical damage. It usually doesn’t cover interruptions caused by non-physical events, like cyberattacks or pandemics. (For those risks, consider Cyber Liability Insurance: see our blog: Why Cyber Protection Is a Business Essential, Not a Bonus.)
How Long Does Coverage Last?
The period of restoration starts when the damage occurs and lasts until repairs are complete or the business resumes normal operations. However, your policy has a time limit on how long those payments can continue. Many policies provide 12 months of coverage, but depending on your business, you may need to extend this to 18 or 24 months to ensure enough time for a full recovery.
It’s important to note that coverage for ordinance or law upgrades, such as rebuilding to meet current building codes, is not automatically included and must be added separately.
Want to Understand How This Fits Into Your Coverage Plan?
If you’ve explored our posts like Why Cyber Protection Is a Business Essential, Not a Bonus or General Liability vs. Professional Liability: Which One Do You Need?, you know we focus on tailored, risk-based protection. Business income coverage is another vital piece. Our team works with you to assess your payroll exposure, operational dependencies, and a realistic recovery period ensuring the coverage aligns with your business, not just your property.
FAQs
Q: Does business income coverage apply to COVID-related shutdowns?
A: Generally, no. Most policies require a direct physical loss to trigger coverage.
Q: How is the payment amount determined?
A: It’s based on Actual Loss Sustained (ALS) — meaning your insurer reimburses the income you actually lost during the covered period.
Q: Is this coverage included automatically?
A: Not always. Some carriers bundle it into a Business Owner’s Policy (BOP), while others require it as an add-on.
Q: How do I know if my policy limits are enough?
A: Your agent can review your financials, payroll, and key dependencies to ensure your coverage matches your real-world risk.
Business Income Coverage isn’t an extra, it’s essential. It ensures your employees, reputation, and revenue survive even when your building doesn’t.
Ready to find out if your policy includes it? Contact Mitchell Insurance Group today to schedule a review.
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