Business interruption insurance

Business interruption insurance covers a loss of business income when your small business is forced to close temporarily, due to a fire or other covered property claim. It can help cover day-to-day operating expenses, lost revenue, and relocation.

Fires, natural disasters, burst pipes, and similar incidents can bankrupt your small business with costly renovations at a time when you're taking in zero profits. Business interruption insurance keeps your business afloat until you can reopen.

You may also see this type of insurance referred to as business income insurance. You can buy this business interruption coverage as an add-on to your commercial property insurance or a business owner’s policy (BOP). Income coverage cannot be purchased as a separate policy.

Business interruption insurance compensates your business for its normal operating expenses and other costs if a fire or other commercial property insurance claim forces you to close your doors temporarily.

Specifically, it can help pay for:

If damage to your building, equipment, or inventory could force your business to close, then business interruption insurance is essential. Any business that operates out of a physical location, depends on tools or machinery to do its work, or sells or manufactures products should carry this coverage.

Industries that rely on business interruption insurance include:

Business interruption insurance covers relevant financial losses when a property claim forces your business to close, but it won't cover every situation. For instance, your policy does not provide coverage for:

While business interruption coverage can be an important part of your risk management plan, there are other small business insurance policies that can also help you protect your business:

General liability insurance: Covers common business risks like customer injury, customer property damage, and advertising injury. It protects your small business from the high costs of lawsuits and helps you qualify for leases and contracts.

Business owner's policy: A BOP bundles general liability coverage and commercial property insurance at a discount. It protects against the most common lawsuits and property damage. You’ll need either commercial property insurance or a BOP, in order to buy business interruption coverage.

Workers’ compensation insurance: Workers’ comp covers medical costs for work-related injuries and illnesses. Most states require this coverage for businesses with one or more employees.

Commercial auto insurance: This policy is required in most states for businesses that own vehicles. It covers your legal bills, medical expenses, and property damage if a business vehicle is involved in an accident.

Cyber insurance: This policy, also called cyber liability insurance and cybersecurity insurance, protects small businesses from the high costs of a data breach or malicious software attack. It covers expenses such as customer notification, credit monitoring, legal fees, and fines. Many cyber insurance policies also include business interruption coverage, for lost income that happens after a cyberattack.

Need a policy recommendation? Answer three questions and we can help you find the right coverage for your business.

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

Most policies will cover any interruptions that last up to 12 months, but the length of time that your coverage applies may vary by insurer. Your business must have been closed for the amount of time specified by your policy (usually around 3 days) before your coverage period can begin.

Yes, you can add endorsements to your business interruption policy, such as:

Extra expense coverage pays for expenses above and beyond a business’s normal operating costs. This type of coverage 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 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

With Insureon, you can chat with a licensed insurance agent to make sure your policy includes everything you need. They can also help explain any confusing policy language.

In most cases, this policy will not cover losses related to the coronavirus pandemic. 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. For that coverage, you would have to purchase a communicable disease rider, and likely also prove the disease was present on your property. If you think your business might qualify for a claim, contact your insurance provider.