What Is Business Income (aka Business Interruption) Insurance?

When something unexpected forces your business to temporarily close its doors, the financial consequences can be immediate and severe. Bills don’t stop, employees still expect paychecks, and customers may turn elsewhere.

Business Income insurance, also known as business interruption insurance, is designed to protect your net income, cover continuing normal expenses, and provide financial assistance with extra expenses to help you maintain financial stability during operational downtime due to a covered cause of loss to property on your insured premises.

“Business Income coverage can help your business financially recover as if the loss never occurred,” explains John Carroll, commercial lines staff underwriter at Central Insurance. “It can make the difference between rebounding quickly or facing a permanent setback.”

Read on to learn more about how business interruption insurance works and what makes it a critical part of protecting your business.  

When Would You Need Business Income Insurance?

Even a temporary or partial shutdown can have lasting consequences for a business. Let’s explore a few scenarios where Business Income coverage can come into play:

Scenario 1: A fire damages a bakery’s kitchen, rendering the ovens and refrigerators inoperable. Not only does the bakery lose the use of its space, but it also misses out on weeks of sales while repairs are underway. Business Income insurance can help replace the income it would’ve earned and cover ongoing normal operating costs such as rent, employee wages, and utilities.

Scenario 2: Fires and storms aren’t always the cause of business interruptions. Sometimes, a critical system loss can be just as disruptive during a stretch of record-breaking summer heat when a boutique fitness studio’s HVAC system suffers catastrophic damage from the compressor seizing due to bearing failure, causing indoor temperatures to soar. With no way to cool the space, the owner must cancel classes and temporarily close for safety reasons. In addition to losing revenue from missed sessions, the business incurs repair costs and pays to expedite parts to get back up and running. By carrying both Business Income coverage and Equipment Breakdown coverage, the studio may recover not only the cost of the repair but also the income lost during the downtime, assisting it to reopen quickly and maintain customer loyalty.

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What Does Business Income Insurance Cover—and Why It Matters

Business Income insurance helps protect your company’s financial stability during a covered loss by addressing two key areas:

1. Lost Net Income—the profit your business would have earned if operations hadn’t been interrupted.
2. Continuing Normal Expenses—ongoing costs that don’t pause because your business does. These may include rent, taxes, loan payments, and employee wages.

Many policies also include extra expense coverage, which reimburses additional costs required to minimize downtime, which could include renting a temporary location, advertising to inform customers of new hours or locations, or paying overtime to help recover lost productivity.

Common Myths About Business Income Insurance

“Business Income coverage plays a critical role in protecting your business,” Carroll advises. “It’s about more than just fixing property—it’s about keeping your business viable after facing a loss.” Despite its importance, this coverage is often misunderstood or overlooked entirely. Let’s explore a few of the most common misconceptions:

Myth #1: It’s only for big disasters.
While significant events like fires and tornados can certainly trigger business income insurance claims, smaller-scale issues, like a burst pipe, can be just as disruptive. If your business must shut down or slow down due to any covered physical damage to property on the insured premises, Business Income insurance can help bridge the financial gap.

“It’s not just for catastrophic losses,” Carroll notes. “Even a localized incident like smoke damage or a car backing into your building can lead to downtime that affects your bottom line.”

Myth #2: Property insurance already covers everything I need.
Commercial property insurance typically covers the cost to repair or replace physical damage, but it doesn’t replace lost income while your business is closed. Business Income insurance coverage picks up where property insurance leaves off by covering net income and reimbursing, payroll, rent, and other ongoing normal expenses while operations are paused.

Myth #3: It’ll kick in whenever my business is closed.
For Business Income insurance to apply, your business must be shut down due to direct physical loss or damage from a covered cause of loss. Voluntary closures, utility outages without physical damage, and closures due to communicable diseases typically do not qualify.

“There has to be covered damage to the property,” Carroll explains. “It’s not designed to respond to economic downturns or supply chain issues—it’s tied to physical loss of insurable property.”

Myth #4: It’s too expensive for small businesses.
Business Income insurance is typically built into your commercial package or BOP, and the added cost is often minimal compared to the financial risk of going without it. Even a few days of lost revenue can pressure a small business’s cash flow and future stability.

The Central Difference

At Central, protecting your income is as critical as protecting your property. That’s why we go beyond coverage—partnering with you to prevent losses before they happen through proactive loss control. When the unexpected does happen, our business interruption insurance helps stabilize your finances, replace lost income, and keep your business moving forward. With responsive claims service and solutions tailored to your needs, we’re here to help weather disruption so your business can return stronger than ever.

Find an agent to learn more about how business interruption coverage can help protect your business.