Business Interruption Insurance Definition

The "Legal-Ease" Glossary
Business Interruption Insurance

This is a rider (i.e., an add-on to an existing insurance policy) for Property Insurance or a Business Owner’s Policy that insures up to 12 months of your business’s income.

Business Interruption Insurance offers additional coverage when your business faces covered property loss or damage that forces it to cease normal operations. During this time of “business interruption,” you are responsible for paying certain expenses, such as…

  • Loan payments.
  • Rent.
  • Salaries.
  • Taxes.
  • And more.

If you’re unable to generate revenue, those expenses can be difficult or impossible to cover without draining your savings account. That’s where Business Interruption coverage can help.

So long as the damage is caused by an event that’s covered by your Property Insurance, Business Interruption Insurance cuts you a check so that you can continue to make these payments while your business gets back on track. Covered events may include loss or damage caused by:

  • Fire.
  • Windstorms.
  • Power outages.
  • Theft or vandalism.

If you have Contingent Business Interruption coverage, you also have protection when your supply chain is disrupted. For example, say you own a small restaurant. Unfortunately, your produce supplier suffers a terrible fire, which turns their product into ashes. While they rebuild and restock their veggies, you have to go through the trouble of finding another business to work with. Until you do, you’re losing money. Luckily, your coverage can reimburse you for lost income during this time.

Not all Business Interruption riders cover supply disruptions, so be sure to check your policy. This is especially worth paying attention to if your business relies on several other businesses to stay up and running. For example, if you run an ecommerce business, your ability to run your website depends on outside services, such as your web-hosting company.

For more information, see our Business Interruption Insurance section or check out our tutorial video.

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