Business income coverage replaces the net income a business would have earned, plus its continuing normal operating expenses including payroll, while covered physical damage forces a suspension of operations. Property insurance rebuilds the building. Business income coverage pays for the months of lost revenue while the rebuilding happens.
Most owners meet the term while buying a property policy, then meet it again after a fire, when the mortgage and key salaries keep coming due against zero sales. Many call it business interruption insurance, the older name for the same coverage.
Business Income
Coverage for the loss of net income and continuing normal operating expenses, including payroll, sustained during the period of restoration after direct physical loss to property at the described premises by a covered cause of loss.
How does business income coverage work?
The trigger is strict: there must be direct physical loss or damage to property at the described premises, caused by a covered peril, and that damage must cause a suspension of your operations. A power outage down the street or a supplier's fire does not qualify without added endorsements. The standard ISO form is CP 00 30, Business Income (And Extra Expense), which also pays extra expense: the costs of avoiding or shortening the shutdown, like renting temporary space or expediting equipment.
Payment runs through the period of restoration, which begins 72 hours after the damage and ends when the property should be repaired with reasonable speed, not when it actually is. An insured who drags out repairs eats the difference. Extended Business Income then covers the earnings ramp up after reopening for up to 60 days, extendable by endorsement.
How much business income coverage do you need?
Start with a 12 month projection of net income plus continuing expenses, then honestly estimate your worst case downtime, including permitting and equipment lead times that routinely stretch past a year. The form's own coinsurance clause penalizes underinsurance against projected annual figures, so the limit and the coinsurance percentage have to be set together.
CP 00 30 offers ways around that math: the Monthly Limit Of Indemnity and Maximum Period Of Indemnity options replace coinsurance with simpler caps, and Agreed Value suspends the coinsurance clause entirely when the underwriter accepts your business income worksheet.
That worksheet is the operational crux. The adjuster who shows up after a loss will ask for financial statements, tax returns, and sales projections, and the insured who completed a worksheet at binding has already assembled the proof. The full worksheet walkthrough is in our business income insurance guide.
Frequently asked questions
Is business income the same as business interruption insurance?
Yes. Business interruption is the traditional name, and business income is the term ISO forms use today. Both describe coverage for lost income and continuing expenses during a shutdown caused by covered physical damage.
Does business income coverage include payroll?
Yes, as a continuing normal operating expense. Ordinary payroll can be limited or excluded by endorsement to save premium, but cutting it means the coverage will not fund keeping trained staff through the shutdown.
How long does business income coverage pay?
Through the period of restoration: from 72 hours after the damage until the property should reasonably be repaired and operations resumed. Extended Business Income adds up to 60 days after reopening, and endorsements can lengthen both the waiting period and the extension.
Does business income cover losses from a power outage or pandemic?
Generally no. The form requires direct physical loss or damage at the described premises by a covered cause of loss. Off premises utility failure needs a specific endorsement, and courts have overwhelmingly held virus related closures do not meet the physical damage trigger.
This definition is for educational purposes. Your policy's specific terms, conditions, and endorsements control. Talk to a licensed broker about your actual exposures.