What Is Business Interruption Insurance?
… Is It Something You Might Need?
The things you regret most in life are the risks you didn’t take.” – Lewis Carroll
Running a business can be risky business…You probably already have coverage for your property, equipment, and liability—but what happens if your operations suddenly come to a halt? That’s where business interruption insurance becomes essential.
This often-overlooked policy could mean the difference between temporary inconvenience and permanent closure. Here’s what you need to know about business interruption insurance—and why it might be the lifeline your business needs.
What Is Business Interruption Insurance?
Business interruption insurance—also called business income insurance—is designed to replace lost income if your business can’t operate due to a covered event. While property insurance covers physical damage to your building or equipment, business interruption insurance helps cover the income you would have earned during the downtime.
This type of coverage is not sold as a standalone policy; it’s typically added to a commercial property or business owner’s policy (BOP).
What Does It Cover?
Business interruption insurance can help cover:
- Lost income during the period your business is closed
- Fixed operating costs like rent, utilities, and payroll
- Temporary relocation expenses if you need to move to a temporary location
- Loan payments that need to continue to be paid during the shutdown
- Taxes and other recurring expenses
- Training costs for employees if you need to learn new equipment after repairs or replacements
The coverage typically kicks in after an event that is covered, such as fire, storm, or vandalism damages your business property and causes a your business to shut down for a period of time.
What’s Not Covered?
It’s equally important to know what business interruption insurance doesn’t cover. Common exclusions include:
Damage from floods or earthquakes (unless you have separate coverage)- Pandemics and viruses (often excluded unless specifically added)
- Undocumented income
- Utilities or services (unless specifically included)
- Partial closures or reduced customer demand
Reading the fine print with your agent is very necessary to understand your exact coverage and limitations.
Real-World Example
Imagine you own a small bakery. A fire in the kitchen causes significant damage, which forces you to close for six weeks during repairs. Your property insurance will cover the damage to the kitchen and equipment, but what about your lost income…employee wages, rent, and utility bills?
Without business interruption insurance, you would have to cover all of those expenses out of pocket. With interruption insurance, your policy could reimburse you for your lost income and help keep the business afloat until you are able to reopen.
Do You Really Need It?
If your business relies on a physical location, equipment, or day-to-day operations to generate income, then yes—business interruption insurance is highly recommended. These types of business would include:
Restaurants, cafes, and retail stores- Manufacturing or production facilities
- Medical, legal, or accounting offices
- Salons, gyms, and service-based businesses
Even if you’re looking at a short closure, shut downs can create lasting financial consequences. Business interruption coverage helps you weather the storm without draining your savings or taking on debt.
How Much Does It Cost?
The cost of business interruption insurance varies based on several factors:
- Type and size of your business
- Industry risks
- Location and building details
- Amount of income you need to protect
It’s generally a small percentage added to your existing business insurance premium—making it a relatively low-cost investment for a high level of protection.
In the long run…
Business interruption insurance isn’t just for worst-case scenarios—it’s for everyday peace of mind. Whether it’s a fire, a break-in, or a burst pipe, the financial hit from a temporary closure can be devastating.
Talk to your insurance provider today about adding business interruption coverage to your policy. A few extra dollars a month could save your business when you need it most.
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