Contingent business interruption insurance (CBI)

Contingent business interruption insurance (CBI) helps protect your small business when a key supplier, vendor, or business partner experiences a disruption that prevents you from operating normally.

Instead of covering damage to your own property, CBI covers the income you lose because a critical outside partner can’t deliver goods or services you rely on.

This coverage can help pay for lost revenue and ongoing expenses like payroll and rent, as well as any extra costs needed to keep your business running until your partner is back online.

If one of your essential third-party suppliers or partners has a business disruption that directly impacts your company’s income, contingent business interruption insurance will cover your resulting losses, including:

• Lost revenue during shutdowns
• Payroll to ensure employee retention
• Rent or mortgage payments on business property
• Extra expenses to keep operating (such as temp suppliers or emergency shipping)

You should also keep in mind that CBI usually only applies when your third-party partner suffers damage from the same types of events, or covered perils, your own commercial property insurance covers—such as fire, windstorms, or vandalism.

CBI bridges the financial gap so you can stay afloat while your partner recovers.

When CBI is added to a cyber insurance policy, it provides financial protection if one of your top external partners, such as a software provider, is forced to shut down due to damage caused by hackers.

Covered perils typically include cyberattacks, such as data breaches, social engineering attacks, and other common cyber threats. This can look like:

• A cloud-based inventory system that gets infected by malware
• A third-party payment gateway that suffers an outage from malicious bots
• A cloud-based customer relationship management (CRM), email marketing software, or other software as a service (SaaS) application that gets attacked
• Third-party software used for billing, scheduling, and client data storage that experiences a ransomware attack
• A cloud-based portal storing sensitive information suffers a data breach

For example, if an e-commerce store’s third-party payment processor gets shut down by a cybercriminal, CBI will pay the e-retailer's operating costs during the downtime, while the provider gets its computer system back online.

Although some cyber insurance policies come with contingent business interruption coverage, the terms and availability vary by policy. Here are some of the key policy details you should review:

• Covered parties: Some policies only cover specific third-party vendors or suppliers
• Covered events: Cyber coverage may be limited to cyberattacks, excluding other types of system failures
• Waiting periods: Many insurance companies will require a certain period to pass, typically 6–12 hours, before cyber coverage kicks in for first-party cyber-related claims
• Exclusions: Some policies deny coverage to certain types of cyber events or third-party service providers, such as basic infrastructure providers

If your cyber insurance policy doesn’t include CBI coverage, you can add it as an endorsement. For example, some insurance providers will limit cyber coverage for IT service providers, so it’s important to check your policy or speak with a licensed insurance agent to ensure you have appropriate insurance coverage.

For many small businesses, success depends heavily on the support of a small number of suppliers, manufacturers, customers, or nearby businesses, and losing just one of these pillars could crumble their entire foundation.

CBI insurance can offer crucial backup support to all kinds of businesses, including:

• Manufacturers that depend on a single supplier for essential parts or materials.
• Restaurants that rely on foot traffic from a nearby stadium, concert venue, or other major attractions.
• Accountants or CPAs on retainer for a single client or entity.
• Retailers that only sell merchandise from a few select vendors.
• Healthcare offices that rely on third-party IT services to store sensitive patient information.

You should consider contingent business interruption insurance if:

• You sell products from a single or a limited number of manufacturers
• Your business would suffer if a nearby business closed
• You offer professional services to one exclusive client
• Your business relies on a third-party service provider for software, an app, or a cloud-based system
• Your products are made with materials from one or a small number of suppliers