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 I need business interruption insurance?
Business interruption insurance (or business income insurance) helps your small business recover from a temporary shutdown due to a devastating event. It can help cover the cost of day-to-day expenses, lost revenue, and relocation.
Damage caused by a storm or other incident 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.
This policy can help pay for:
Revenue the small business lost as a result of the incident
Normal operating costs during the shutdown
Temporary relocation of your business
Boost your business interruption coverage with endorsements
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 does business interruption insurance work?
Business interruption insurance covers the cost of a temporary shutdown when:
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.
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: