Why Your Business Income Policy May Not Cover What You Think
Author Peter Katkov | Founder | Peter Katkov is the Founder and CEO of Apex Risk & Insurance Services, a boutique commercial insurance brokerage headquartered in Carlsbad, CA. Peter founded Apex to bring high-touch, client-focused risk mitigation back to San Diego business owners. Apex specializes in hard to place coverage for industries ranging from construction and hospitality to wave pools and life sciences.
A lot of California business owners carry business interruption insurance and assume they are protected. But coverage does not trigger just because your business lost income. It triggers when a covered loss hits your owned property. That distinction matters more than most people realize.
In this video, Peter Katkov, CEO and Founder of Apex, walks through exactly how business income coverage works, which industries face the most exposure, and why events like the Idyllwild floods and COVID taught business owners a hard lesson about coverage gaps.
Not Every Business Faces the Same Flood and Earthquake Risk
Some industries are far more vulnerable to earthquake and flood losses than others, and it comes down to one question: how dependent is your business on a specific physical location to generate revenue?
Location-Dependent Businesses Carry the Most Exposure
Hotels, restaurants, machine shops, and manufacturing facilities all share the same vulnerability. If the property is damaged or inaccessible, revenue stops. There is no workaround, no pivot, no remote option. The income loss is direct and immediate.
A service business like an office-based firm operates differently. If a building floods, employees can work from home, relocate to another suite, and be back to normal operations within days. The disruption is real but manageable.
For a manufacturer whose entire facility is flooded or damaged, the impact is a different category of problem entirely. Equipment, inventory, production timelines, and customer commitments are all on the line simultaneously.
The Coverage Trigger Most Business Owners Miss
Here is where many business income claims fall apart: coverage requires a covered cause of loss to your owned property. Not to someone else’s property. Not to the infrastructure around you. Yours.
What Happened in Idyllwild
When floods washed out the roads leading up to Idyllwild, businesses lost customers for weeks. The access was gone. But the businesses themselves were not damaged.
Because there was no covered loss to owned property, there was no coverage trigger. Business interruption insurance could not respond, even for policyholders who thought they had strong protection.
What Happened During COVID
The same logic applied during the pandemic. Restaurants were forced to close, revenue disappeared, and business owners expected their business income policies to respond.
They did not. A pandemic is not a coverage trigger under a standard property policy. There was no physical damage to owned property, so there was nothing to trigger the business income coverage. Courts upheld that position across thousands of claims.
The Bridge Scenario
The same principle applies to infrastructure damage. If an earthquake brings down a bridge that feeds traffic to your business, that bridge does not belong to you. It is not insured under your policy. The loss of access and the resulting income loss are not covered, even if earthquake is listed as a covered peril.
What Earthquake and Flood Coverage Actually Costs
Flood coverage is relatively affordable. For most businesses, adding a dedicated flood policy is not a significant budget line.
Earthquake coverage is a different conversation. It costs meaningfully more than standard property coverage, and for a straightforward reason: when an earthquake event is large enough to trigger a claim, the losses tend to be large. An event that shakes an entire neighborhood does not produce small, isolated claims. The scale of the loss is why the premium reflects it.
Understanding that cost context helps business owners make a more informed decision about whether to carry the coverage, rather than making the call based on premium alone.
Building a Program Around Your Actual Exposure
The right approach to earthquake and flood coverage depends on your industry, your location, your revenue structure, and your ability to absorb a loss. There is no one-size-fits-all answer.
What Apex does is help business owners understand their actual exposure, identify where the gaps are, and build a program that fits both their risk and their budget. That conversation is worth having before a loss event makes the decision for you.
