2024-01-01 · business, income

Business Interruption Coverage

Overview

Business interruption insurance replaces income when a covered event forces you to slow or stop operations. It is often paired with commercial property insurance and helps keep payroll and essential expenses paid while you recover.

What it covers

Business income: replaces profit you would have earned.
Extra expense: pays for temporary locations or expedited shipping.
Continuing expenses: rent, utilities, and certain payroll.
Civil authority coverage: helps when government orders restrict access after a covered loss.

Key requirements

The interruption must result from direct physical loss or damage covered by the property policy.
Most policies have a waiting period (often 48–72 hours) before coverage starts.
Coverage ends when the business is reasonably restored, not necessarily fully rebuilt.

Common exclusions and limits

Power failures originating off-premises unless endorsed.
Pandemics and communicable disease without specific endorsements.
Supply chain disruptions unless contingent coverage is added.
Policy limits and sublimits that cap income replacement.

Cost drivers

Revenue and payroll size: higher exposure costs more.
Industry risk: manufacturing or hospitality may face higher rates.
Location hazards: flood, wildfire, or severe weather risk impacts pricing.
Resilience planning: backup sites or disaster plans can reduce premiums.

How to compare policies

Align the indemnity period with realistic rebuild timelines.
Verify covered causes of loss and add endorsements if needed.
Document your revenue history to support accurate limits.
Ask about contingent business interruption if suppliers are critical.

Frequently asked questions

Does it cover lost profits only? Most policies cover both net income and continuing operating expenses, so payroll and rent can be included.

How do I file a claim? Provide financial statements, document the trigger event, and keep records of extra expenses to support reimbursement.