Business Interruption Insurance for Income Protection

Business Insurance for Business Interruption

Business Interruption Insurance, also called Business Income coverage, protects your revenue stream when disasters disrupt your operations. When fire, storm damage, or other covered events force you to close temporarily, you still have bills to pay—rent, utilities, employee wages, and loan payments don't stop. This coverage replaces the income you would have earned and helps cover continuing expenses, bridging the financial gap between the disaster and reopening your doors.

Why Your Business Needs This

• Fire damages your building, forcing a three-month closure for repairs
• Storm damage makes your location unusable while you rebuild
• Equipment failure shuts down your production or service delivery
• You need to cover payroll, rent, and expenses with no revenue coming in
• Recovery takes months, burning through your cash reserves

What It Covers

Business Interruption Insurance reimburses you for lost net income during the restoration period. It covers continuing operating expenses that don't stop even when you're closed, including rent or mortgage payments, utilities, employee salaries, and loan payments. The policy pays for extra expenses you incur to minimize the interruption, such as renting temporary space or equipment. Some policies include extended business income coverage, continuing to pay for a period after you reopen while you rebuild customer traffic. Coverage typically requires a physical loss to your property from a covered peril.

How Is Coverage Calculated?

Business Interruption coverage is based on your historical financial records and projected income. Insurers typically review your past income statements, profit and loss reports, and tax returns to establish your baseline income. The policy pays based on what you would have earned during the closure period. You'll need accurate financial records to support your claim. Some businesses have seasonal fluctuations that must be accounted for. Working with your insurance provider and accountant to properly value your potential loss ensures adequate protection. Underestimating your need leaves you financially exposed during recovery.

What's the Waiting Period?

Most Business Interruption policies include a waiting period, sometimes called a deductible period, before coverage begins. Common waiting periods range from 48 to 72 hours after the covered event. This means you're responsible for the first few days of lost income and expenses. The waiting period prevents claims for very brief interruptions and reduces premium costs. Understanding your policy's waiting period helps you plan for short-term cash flow needs. Some businesses maintain emergency funds to cover expenses during the waiting period.

Is Business Interruption Included in Other Policies?

Business Interruption coverage is often included in Business Owner's Policies and can be added to Commercial Property policies. However, standard limits may not be sufficient for your needs. Review your existing policies carefully to understand what business income protection you have. You may need to increase limits or add extended coverage periods. Standalone Business Interruption policies are available when you need specialized or higher coverage. Don't assume you're protected—verify your coverage amount would sustain your business through a realistic recovery period.