Why Business Interruption Insurance Is a Must for Texas Businesses in 2025

Business interruption insurance helps Texas businesses recover lost income during disasters. 

If your business had to shut down for two weeks due to a storm, fire, or other disaster, how would you cover your expenses—or recover lost income? For many Texas business owners, that’s a frightening but very real scenario.

That’s where business interruption insurance comes in. While property insurance covers physical damage, business interruption coverage replaces the income lost during downtime—so your business can survive the unexpected.

What Is Business Interruption Insurance?

Business interruption insurance (also called business income coverage) helps cover your revenue loss and fixed costs when your business operations are temporarily suspended due to a covered peril.

These perils often include:

• Fires and smoke damage
• Wind and hailstorms
• Theft or vandalism
• Damage from burst pipes
• Tornadoes or hurricanes (depending on the policy)

In Texas—where natural disasters are common—this type of insurance can be a lifeline for small businesses.

What Does It Cover?

A typical business interruption policy can help with:

• Lost income (based on historical financial records)
• Ongoing expenses like rent, utilities, and loan payments
• Payroll for employees during the closure
• Temporary relocation costs if your business must operate from a new location
• Training costs to operate replacement equipment (if applicable)

This coverage usually kicks in after a short waiting period (often 48–72 hours after the event) and continues until your business can reopen.

Who Needs Business Interruption Insurance?

Nearly every business that relies on a physical location or consistent operations should consider business income insurance. This includes:

• Restaurants and cafes
• Retail stores
• Salons and spas
• Medical and dental offices
• Manufacturing facilities
• Warehouses and logistics businesses

Even home-based businesses could benefit if they rely on equipment or in-person customer visits.

Real-Life Scenarios in Texas

Scenario 1: A boutique in Dallas is damaged during a hailstorm. Repairs take two weeks. During that time, the shop can’t serve customers, losing $20,000 in revenue. Business interruption insurance replaces that income and helps cover payroll and rent.

Scenario 2: A small bakery in Houston suffers water damage from a burst pipe. While the kitchen is being restored, the owners rent a temporary kitchen. Business interruption coverage helps pay for relocation costs and keeps employees on payroll.

What’s Not Covered?

This coverage has important exclusions. Most policies do not cover:

• Pandemics or virus-related shutdowns
• Partial interruptions (unless operations fully stop)
• Undocumented income
• Utility failures not caused by physical damage
• Cyberattacks (unless bundled with cyber insurance)

Understanding your policy’s fine print is essential—especially the waiting period and coverage limits.

How to Get It

Business interruption insurance is often bundled into a Business Owner’s Policy (BOP), which combines it with:

• General liability insurance
• Commercial property insurance

This bundled approach provides broad protection at a lower cost than buying each policy separately.

How Much Does It Cost in Texas?

The cost of business interruption insurance varies depending on:

• Industry and size of your business
• Annual revenue
• Location (risk of weather events or crime)
• Claims history

In Texas, small businesses can expect to pay between $500 and $2,500 per year for a BOP with business interruption coverage.

Final Thoughts

Disasters are unpredictable—but your financial recovery doesn’t have to be. Business interruption insurance gives you the stability to keep going, even when your doors are temporarily closed.

Want to protect your Texas business from unexpected downtime? Contact McKnight Insurance to explore customized coverage options.