Who Is Eligible for Business Interruption Insurance?
Say you own a catering business. You've got a big corporate event coming up in less than two weeks – and that's when disaster strikes. A windstorm knocks a giant oak tree on your building, destroying expensive kitchen equipment and supplies in the process. With nothing but broken pieces, how do you pull your business out of the weeds?
Business Interruption Insurance (or Business Income Insurance) may help your business recover from a devastating event, natural disaster, or supply chain interruption that forces your business to temporarily close down. A typical Business Interruption policy may provide coverage for:
- Day-to-day expenses.
- Relocation costs.
Any small-business owner can get this coverage, right? Not necessarily. Let's examine which types of small business are eligible for Business Interruption Insurance.
Business Income Insurance Eligibility and Limitations
If we revisit our example, there's a key component missing. Do you run your catering business at a dedicated commercial location or out of your home? The answer to that question may determine whether or not you are eligible for Business Interruption Insurance. Let's look at it both ways.
- You operate your business at a dedicated commercial location. Business Interruption Insurance is typically only offered to businesses with a dedicated business location. In our example, a fallen tree halts your operations. If it's an event covered by your Commercial Property coverage (which you may have as part of a Business Owner’s Policy, or BOP), it can trigger your Business Income benefits.
- You operate your business out of your home. If you work out of a home office, you may be out of luck when it comes to Business Interruption Insurance. Most insurance providers won’t write this policy for businesses that don’t have a dedicated (non-home) location. While you may still be eligible for a BOP, you likely won’t be able to add a Business Income Rider to that policy. To explore other coverage options for a home-based business, talk to your insurance agent.
Business Interruption Insurance eligibility is also subject to your business's…
- Classification or industry.
- Previous business interruption claims.
Is that the final word on Business Interruption eligibility? Nope. Requirements, eligibility, and other factors vary from carrier to carrier and business to business. So if you aren’t sure whether you qualify for this type of coverage, ask your agent for details.
Also worth noting: even businesses that have Business Interruption Insurance usually have to be closed down by a covered event for 72 hours before their benefits become available. It's a complex policy, which is why you should read through it carefully and ask your insurance agent for clarification before making a purchase.
Your insurance agent is one of your best resources for understanding how your coverage works and finding the policy that addresses your business's unique situation. Don't be shy about asking questions! Another great place to start? Check out our article "What Business Interruption Insurance Can and Can’t Cover."