Best Business Income Insurance

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Contributor, Benzinga
Updated: November 18, 2021

If your business was forced to close tomorrow, would you be able to cover your outstanding payroll expenses? What about the cost of buying groceries or paying your mortgage? No business owner anticipates a shut down due to a fire, hurricane or other hazard. Unfortunately, this is the reality for thousands of small business owners across the country each year. A comprehensive business income insurance policy can protect you, your staff and your livelihood if you’re forced to temporarily close. If you need business income insurance but aren’t sure where to begin, our guide will help you compare your options. 

Best Business Income Insurance

Many major insurance providers offer business income insurance protection. Consider a few of our top choices below and get a few quotes.  

Types of Business Income Insurance

Business income insurance (sometimes referred to as business interruption insurance) is a type of insurance protection that compensates you if your business is forced to close. For example, if you own a restaurant and your kitchen catches on fire, you’ll likely need to shut down while a repair crew works on restoring your business. In this instance, your coverage can provide money based on the income that you lost due to the closure.

Some more situations where business income policy can compensate you include:

  • Replacing lost net income if your business is forced to close due to a covered peril
  • Paying for continuing operating expenses like payroll while your business is closed
  • Paying for relocation and advertising expenses if you’re forced to open at a temporary location

It’s important to note your business interruption insurance will only compensate you for the regular income you would have earned if you’re forced to close. It won’t cover the cost of repairing your business or rectifying damages. If you need coverage for physical damage, you should enroll in a commercial property liability insurance policy.

In addition to your base income protection policy, you may be able to add the following endorsements and optional coverages to your policy.

Utility Service Protection

Utility services coverage extends your business interruption insurance to include situations when your business is forced to close due to public utility failures. These causes of closure are almost always excluded from standard business policies. Some examples of utility-based service interruptions include power line failures and water service interruptions. 

Dependent Property Insurance

Dependent properties insurance protects your business from lost income resulting from a secondary source. Some examples may include:

  • A supplier who is unable to deliver the products that you need to stay open
  • A marketing company failure that fails to attract customers to your business
  • Customers who are unable to visit your property and thus cannot purchase your products or services
  • Manufacturers that produce a faulty product that you are unable to sell

Civil Authority Coverage

Civil authority coverage extends your business interruption insurance to include lost income that results from forced government closures of your business. Like utility insurance, civil action is typically an excluded peril on business income insurance.  

A business impact analysis, as described here by Ready.gov, can help you determine the risk level your business faces here, what impact a civil disturbance can have and, in turn, how much coverage you need.

Cost of Business Income Insurance

The price you’ll pay for your business interruption insurance will vary depending on your industry’s risks as well as your revenue. Some of the factors that may influence what you’ll pay for your business income insurance may include:

  • Your business revenue. Your business income insurance will protect documentable lost income. The higher your business revenue, the more you can expect to pay for your coverage because higher revenues mean higher payouts if you need to use your insurance.
  • Your industry. Certain industries are more prone to accidents than others. For example, if you own a restaurant, you’ll pay more for your business income insurance than you would if you owned an accounting firm because you’d face a higher risk of damage or closure.
  • Your commercial property value. If you rent your commercial space and are forced to close down your business, your business income insurance may help cover the cost of your rent while your building is repaired. If you have a more expensive commercial property, you can expect to pay more for your business income insurance.
  • Your claims history. If you’ve filed an insurance claim in the past, you may be statistically more likely to file another claim in the future. This means that you’ll pay more for your insurance.

Business interruption insurance usually costs about $40 to $130 per month, but you may pay more if you have a high revenue business, rent an expensive commercial space or are likely to file a claim in the future. 

We recommend getting at least 3 quotes from competing business insurance providers before choosing your policy to make sure that you aren’t overpaying for your coverage. 

How Business Interruption Insurance Works

Business income insurance is a specific type of insurance protection that compensates you for lost income if you’re forced to close your doors. Some coverages that your business interruption insurance might provide may include:

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Fixed costs. This includes things like water, utilities and electricity that you need to continue to pay for while your building is repaired. Your business income insurance may also include rent if you don’t own your commercial space. New or temporary location. If you have the option to work from a remote site or to set up a temporary office space while your building receives repairs, your business income insurance will help you cover the costs of moving and your new rent. Business income and commissions. If your business must shut down, your business income insurance will compensate you for profits and commissions you would have otherwise earned if your business was open. You'll have to show proof of income for this, and your coverage will increase with your income. Payroll expenses. If you need to continue paying payroll expenses for your employees or contractors while your business is closed, your business income insurance will help cover salaries and expenses until you can open again. Taxes. Even if your business is closed, you must still pay your quarterly estimated taxes. If you can’t afford your tax payment, your business income insurance might be able to help.  

Like most other types of insurance policies, business income insurance includes a list of covered perils that you’ll need to understand when you sign up for coverage. If your business must close due to a covered peril, your business income insurance will kick in and provide you with the protections included in your policy. Some examples of commonly covered perils can include:

  • Fire
  • Hurricanes
  • Vandalism

The specific perils that you’ll have coverage under will vary depending on your policy provider. Be sure to read your policy in-full before you sign on so you know exactly what is and isn’t covered.

Business interruption insurance won’t cover everything. Some examples of common exclusions include:

  • Undocumented income that isn’t reported on your taxes or bank statements
  • Falsified payroll or tax expenses
  • Losses resulting from a peril not included on your policy, such as flooding and government-forced closures
  • Broken items resulting from your covered peril (commercial property insurance can help with this)
  • Lost revenue from a voluntary business closure
  • Lost revenue for a business that was failing naturally

Most business interruption insurance policies include a waiting period that begins once you sign onto your coverage. You must wait for this period to expire before you can start using your insurance.

The average waiting period is 48 to 72 hours. Your business income policy will also include a coverage limit. If you hit your coverage limit, you won’t be able to claim any further benefits or payments from your insurance provider. This makes it especially important to document all of your tax liabilities and income when you sign up for coverage.

Most business interruption insurance specifies that your period of restoration (the period of time when you can use your business income insurance) lasts between 30 days to 12 months. For example, if your business closes on October 1 and your policy has a 12 month period of restoration, you’ll receive benefits until October 1 of the next year. 

Protect Your Business

Business income insurance can be an important safety protection, especially for small business owners. But how can you be sure that you have the best coverage for you?

The best way to ensure that you have the right policy for you is by comparing terms and quotes from competing insurance providers. Start with the recommended providers from Benzinga, and protect your livelihood today. 

Q
What is business interruption or income insurance?
A

This type of coverage provides financial support for lost income or extra expenses incurred during a business interruption due to a named peril covered under the policy.

Q
How is business income calculated?
A

Typically, your business income is calculated by your net profit or losses, or, in simpler terms, any income accrued by a business’ operations once all the expenses associated with doing business have been accounted for.