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Business Interruption Insurance

Replace lost income when covered property damage forces you to close.
Can't find your industry?

Business Interruption Insurance can replace your revenue when you're forced to close your business for certain reasons. Specifically, if a fire (or any event covered by your Commercial Property Insurance) means you have to shut your doors, Business Interruption Insurance can help pay ongoing bills until you reopen.

Your Business Interruption Insurance coverage can help pay…

  • Rent.
  • Employee salaries.
  • Taxes.
  • Loan payments.

Repairing a ruined office or shop may seem expensive – and it is. But repairs are only one expense you'll face after property damage. As long as you can't open your doors, you can't bring in revenue. That's what's known as "business interruption." According to one insurance company's report [PDF], the average business interruption claim tops $1 million dollars.

So if you have Property Insurance (or a Business Owner's Policy) without Business Interruption Insurance, you could be in serious financial trouble if you ever have to shut down unexpectedly.

Business Interruption Insurance is an essential survival tool for small businesses.

The average Business Interruption claim costs $1.36 million

What Is Business Interruption Insurance?

Business Interruption Insurance can help cover your expenses when you're shut down because of a covered property event. But what exactly can your benefits do? A typical Business Interruption policy may cover:

  • Revenue: The income you would have earned if the incident hadn't occurred.
  • Day-to-day expenses: Normal operating costs like employee wages.
  • Relocation: The cost of moving your business to a temporary location. This might include both moving costs and rent.

Watch the video "What Is Business Interruption Insurance?" for more coverage details.

Business Interruption Insurance can replace lost revenue, pay relocation expenses, and cover ongoing costs.

How to Get Business Interruption Insurance

Business Interruption Insurance is tied to Commercial Property Insurance. When you apply for coverage, check the box for Property Insurance.

If you have a Business Owner's Policy, you may already have Business Interruption Insurance coverage, but ask your agent to be sure.

Business Interruption Insurance Checklist

Let's say a fire damages your office building and you need Business Interruption coverage. Here's what has to happen before you can collect benefits:

  • Your business must have a Property Insurance policy. Without a Business Owner's Policy or Property Insurance, you can't get Business Interruption coverage.
  • The cause of the interruption must be covered by your Property policy. Property Insurance usually covers fire damage, theft, vandalism, and certain storms. If you're not sure what your policy covers, check your policy or ask your agent.
  • Your business must be forced to close completely. If you're still operating in any capacity (even out of your home or online) and bringing in revenue, you won't be able to collect Business Interruption benefits.
  • You must meet the policy's time deductible. Usually, you have to be shut down for 72 hours before you can collect benefits. That means you need to be able to make it through three days with your own resources.

Business Interruption Insurance policies usually offer up to 12 months of coverage while you get your business back up and running. Learn more in the article "New England Snow and Business Interruption."

You must have Commercial Property Insurance or a BOP to get Business Interruption coverage.

Two Business Interruption Questions to Ask Your Agent

While out-of-the-box Business Interruption Insurance is enough for most businesses, some people may benefit from a few add-ons. To make sure your policy can fully cover your business, ask your insurance agent these two questions:

  1. What if my temporary location costs more than my usual space? Let's say you're forced to move to a new location while your old one is being repaired. The place you find has higher rent than your normal spot. Your Business Interruption benefits may not cover the full amount, but if you add Extra Expense Coverage, you'll likely have enough.
  2. What if I stay open but one of my suppliers shuts down? Let's say your deli is running great, but your beef supplier experiences a major fire. They're unable to send you the shipments you depend on, which means you don't have product to offer your customers. Your physical business hasn't been hit, so your Business Interruption policy won't help. But if you add Contingent Business Interruption Insurance, you may have coverage. The details here are important, so make sure you talk to your agent.


Business Interruption Insurance: The Difference between Survival and Closure

For your business to earn a profit, it must be open. Interruptions can lead to losses and in some cases permanent closures. Business Interruption Insurance helps you survive an unexpected catastrophe so you can get back to normal operations.

Even though this coverage can make the difference between a business's success and failure, most small businesses don't have it. That's most likely because they don't know it exists. A National Association of Insurance Commissioners study [PDF] found that just 35 percent of small businesses have Business Interruption Insurance.

Now that you know how powerful this coverage is, you can improve your odds of surviving the unexpected.

Business Interruption Insurance: Further Reading