What is business interruption insurance?

Business interruption insurance (or business income insurance) helps your small business recover from a temporary shutdown tied to a commercial property insurance claim, such as a fire. It can help cover the cost of day-to-day expenses, lost revenue, and relocation.

Damage caused by fires, storms, and other incidents can lead to financial loss and, in some cases, permanent closure. Business interruption insurance keeps your business afloat until you can reopen. Learn more about business interruption insurance coverage.

Extra expense coverage pays for expenses above and beyond a business’s normal operating costs. This rider funds "extras" – i.e., non-ordinary operating costs like leasing equipment, paying employees overtime, or hiring temporary workers – that can help keep your business open after a disruptive event.

Contingent business interruption insurance provides financial assistance when the loss of a primary supplier, partner, or customer affects your ability to do business. It pays for ongoing expenses while you search for a replacement. This rider makes sense if your business relies on:

• A single supplier or manufacturer to provide certain materials
• A few major customers to provide most of your revenue
• Other nearby businesses to attract customers

Business interruption insurance covers the cost of a temporary shutdown when:

• Your business has commercial property insurance through a standalone policy or a business owner's policy.
• The property insurance policy covers the cause of the interruption. Property insurance usually covers fires, theft, vandalism, and extreme weather.
• Your business shuts down completely. If you’re still operating and bringing in revenue in any capacity (even online or out of your home), you won’t be able to collect business interruption benefits.

Your business must be closed for a certain period of time – usually 72 hours, but it varies by policy – before you can begin collecting benefits. Most policies will cover any interruptions that last up to 12 months. Each insurer may include different business interruption coverages and exclusions to distinguish itself from the competition.

To qualify for business interruption insurance, most insurance providers require that your business have a commercial location. If you operate your business out of your home, you likely won’t be able to add business interruption insurance to your business owner’s policy.

Other factors can also affect your business’s eligibility for business interruption insurance, including:

• Business classification or industry
• Previous business interruption claims
• Your location

In most cases, this policy will not cover losses related to the coronavirus. Business interruption insurance activates alongside a commercial property insurance claim, such as a fire, burst pipe, or other incident that causes physical damage to the building covered by your policy.

Insurance companies do not include protection against communicable diseases as standard coverage. (You would have to purchase a communicable disease rider.) However, if you think your business might qualify for a claim, contact your insurance provider.

Learn more about COVID-19 business insurance coverage.

Business interruption coverage is tied to commercial property insurance and is often part of small business insurance bundles like a business owner’s policy. To add business interruption coverage, look for the rider when you apply for either insurance policy.