Business Interruption Insurance
Replaces lost income when your business is shut down by a covered event.
Typical cost: Typically included in property coverage
What Is Business Interruption Insurance?
Business interruption insurance (business income insurance) replaces lost profits and covers continuing expenses when your business must close temporarily due to a covered peril like fire, storm damage, or other property losses. It bridges the gap until you can resume normal operations.
How It Works
Business interruption coverage pays your net income that would have been earned, continuing fixed expenses (rent, utilities, payroll), extra expenses to minimize the shutdown period, and costs to operate from a temporary location. Coverage begins after a waiting period (typically 48-72 hours) and continues until operations resume or the coverage limit is reached.
Coverage Triggers
Business interruption typically requires a covered property loss. If fire damages your building and you must close, BI kicks in. However, closures without physical damage—like pandemic shutdowns or utility failures—may not be covered without specific extensions.
What's covered
Lost Business Income
Replaces net profits your business would have earned during the shutdown period.
Continuing Expenses
Covers ongoing costs like rent, utilities, loan payments, and payroll.
Extra Expenses
Pays additional costs to expedite reopening, like rush repairs or equipment rental.
Temporary Location
Covers costs to operate from an alternate location while your premises are restored.
Civil Authority Coverage
Pays when government orders prevent access to your premises.
Contingent Business Interruption
Covers losses when your suppliers' or customers' operations are disrupted.
Pros and cons
Advantages
- Maintains cash flow when revenue stops due to property damage
- Covers fixed expenses that continue during closure
- Extra expense coverage speeds recovery
- Temporary location coverage keeps you serving customers
- Civil authority coverage for access restrictions
- Often included in BOPs and commercial property policies
Considerations
- Requires a covered property loss to trigger coverage
- Waiting periods delay when benefits begin
- Coverage limits may be exhausted before full recovery
- Pandemic and virus exclusions now common
- Proper documentation of losses essential for claims
- Coinsurance provisions may reduce payouts
Frequently asked questions
Related coverage
Bundled coverage combining general liability and commercial property insurance.
Core business protection against third-party bodily injury and property damage claims.
Errors & omissions coverage for professionals providing advice or services.
Coverage for businesses that manufacture, distribute, or sell products.
Required coverage for employee work-related injuries and illnesses.
Vehicle coverage for business-owned cars, trucks, and fleets.
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