If a business is forced to temporarily close due to a catastrophic event such as a fire, business interruption insurance can pay for lost revenue, day-to-day expenses, and rent or relocation costs.
When do small businesses need 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.
Revenue the small business lost as a result of the incident
Normal operating costs during the shutdown
Temporary relocation of your business
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Extra expense 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
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
How much does business interruption insurance cost?
Business interruption insurance can be inexpensive for a small business. Several factors affect policy costs, including:
The property insurance policy covers the cause of the interruption. Property insurance, sometimes referred to as business hazard 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.
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Who is eligible for business interruption insurance?
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
Does business interruption insurance cover losses related to COVID-19?
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.
"The response time was almost immediate. The options I was given were based on my company's needs. I received the policy in record time."
Esther L.
Management consultant
"Raynaldo made quick work of things. I told him what I needed, and ultimately I had a certificate of insurance in a matter of hours."
Michael D.
Programmer
"I had an urgent contractual requirement for insurance in December to pay before the end of the year. Holly Burton worked with The Hartford to send me an invoice around Christmas. I have saved hundreds in taxes."
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Software / internet design
"Great streamlined process. Quick, easy, and support is very helpful."
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System integration
"Denise Smith is a breath of fresh air. I loved every second dealing with her. And, yes, I'm talking about buying insurance. Most people don't love that, but Denise made the experience exceptional. She is a rock star!"
Kristine W.
Food products manufacturing
"We needed quotes fast and coverage even faster. We received both. We appreciate your service. THANK YOU."
Rich H.
Engineer
"The response time was almost immediate. The options I was given were based on my company's needs. I received the policy in record time."
Esther L.
Management consultant
"Raynaldo made quick work of things. I told him what I needed, and ultimately I had a certificate of insurance in a matter of hours."
Michael D.
Programmer
"I had an urgent contractual requirement for insurance in December to pay before the end of the year. Holly Burton worked with The Hartford to send me an invoice around Christmas. I have saved hundreds in taxes."
Richard C.
Software / internet design
"Great streamlined process. Quick, easy, and support is very helpful."
Ryan F.
System integration
"Denise Smith is a breath of fresh air. I loved every second dealing with her. And, yes, I'm talking about buying insurance. Most people don't love that, but Denise made the experience exceptional. She is a rock star!"
Kristine W.
Food products manufacturing
"We needed quotes fast and coverage even faster. We received both. We appreciate your service. THANK YOU."
Rich H.
Engineer
"The response time was almost immediate. The options I was given were based on my company's needs. I received the policy in record time."
Esther L.
Management consultant
"Raynaldo made quick work of things. I told him what I needed, and ultimately I had a certificate of insurance in a matter of hours."
Michael D.
Programmer
"I had an urgent contractual requirement for insurance in December to pay before the end of the year. Holly Burton worked with The Hartford to send me an invoice around Christmas. I have saved hundreds in taxes."
Richard C.
Software / internet design
"Great streamlined process. Quick, easy, and support is very helpful."
Ryan F.
System integration
Updated: February 2, 2023
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