Business Interruption

What is business interruption insurance?

Business interruption insurance helps cover the income and expenses your business loses when a covered event, like a fire, storm, or water damage, forces you to pause operations or work from a temporary location. It isn’t usually sold on its own. It’s typically added to your commercial property policy, since a claim starts with physical damage to your building or equipment.

What it covers

• Lost income, based on your normal financial performance
• Fixed costs that don’t pause, like rent, mortgage payments, and loan payments
• Payroll, so you can keep paying staff while you’re closed
• Relocation and extra expenses, if you need to operate from a temporary space
• Taxes and other recurring obligations tied to running the business

What triggers a claim

Coverage kicks in after direct physical loss or damage to your property from a covered peril. It doesn’t respond to a slow sales month, a lost contract, or a downturn in your industry. Two related extensions worth knowing about:

Civil authority coverage helps if a government order blocks access to your business because of damage nearby, even when your own building wasn’t touched.

Extra expense coverage helps pay for the reasonable costs of getting back up and running faster, like renting temporary space or equipment.

What it typically doesn’t cover

• Flood or earthquake damage (these usually need their own policy)
• Losses that aren’t tied to physical property damage
• Income you can’t document through financial records
• Pandemics or communicable disease closures, unless specifically added

How coverage periods work

Most policies apply a short waiting period after the damage occurs before coverage begins, then pay out over a “period of restoration,” the time it reasonably takes to repair the property and get back to normal operations.