Business interruption insurance helps make up for the revenue your business loses while recovering from an accident or disaster. This kind of business insurance can also help cover extra expenses, like renting a satellite office, while you rebuild.
Business interruption insurance is a good choice for business owners who would be forced to stop operations while rebuilding after a fire or disaster. It’s not usually sold on its own. Instead, you can buy this coverage as part of a business owner’s policy.
Business interruption insurance is also called business income insurance.
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What does business interruption insurance cover?
Business interruption insurance typically covers:
- Lost revenue during the recovery period.
- Rent, mortgage or lease payments.
- Loan payments.
- Taxes.
- Payroll.
- Training employees to use replacement equipment.
Look for a business interruption insurance policy that includes extra expense coverage. This covers costs like:
- Renting a temporary space.
- Outfitting that temporary space.
- Spending extra money, such as paying a contractor overtime, so repairs move faster.
What isn't covered by business interruption insurance?
Business interruption insurance typically doesn’t cover losses caused by:
- Floods.
- Earthquakes.
- Utility outages.
- Pandemics or disease outbreaks.
In order for business interruption insurance to pay out, the event that caused the loss — that is, the natural disaster or accident — must be covered under your commercial property insurance policy. Most property insurance policies cover damage caused by a fire, hail or vandalism. Most exclude damage caused by a flood or earthquake.
Business interruption insurance won’t cover revenue that isn’t documented in your business financial records. It also doesn’t pay out to cover repairs themselves — that’s what business property insurance is for.
» MORE: How to get business insurance
Save up to 30% on business insurance
NerdWallet Small Business helps you get real-time quotes from 30+ insurers, and instant access to your Certificate of Insurance (COI) through our partner, Coverdash.
How much does business interruption insurance cost?
Business interruption costs vary by industry, location, number of employees and how much coverage you want. If you’re in an area with a higher risk of certain natural disasters, you might pay more.
Higher policy limits will also increase your premiums. To determine how much coverage you want, think about your revenue forecasts and how much you'd lose if you closed for a week or a month. Also, consider how hard it would be to find a temporary location.
As with most types of business insurance, you can pay extra to have your business interruption insurance cover more scenarios. Additional coverage options include:
- Civil authority: Pays you when the government blocks off access to your business because of damage to something nearby.
- Alterations and new buildings: Pays you if your business is damaged by alterations to your building or construction nearby.
- Interruption of computer operations: Pays you if a computer virus or something else causes the destruction or corruption of your company’s electronic data.
Does business interruption insurance have a deductible?
Business interruption insurance usually doesn’t start paying out until 72 hours after the damage occurs. This is essentially your deductible — three days of lost revenue.
Business interruption insurance coverage typically ends 30 days after property repairs are complete or after 12 months.
Do I need business interruption insurance?
If damage to your building, equipment or inventory would force your business to shut down or operate at reduced capacity, business interruption coverage is a good idea.
However, if your team could work remotely or if you don’t manufacture your own items, you may be able to get by without it.
How to get business interruption insurance
The easiest way to get business interruption insurance is as part of another insurance policy.
If you have 100 or fewer employees or annual revenue below $5 million. Consider a business owner's policy. These policies usually include business interruption coverage along with other basic protections, like general liability insurance and commercial property coverage. However, some industries (such as restaurants) may not be eligible for a BOP due to their specific risks.
If you own a larger business or valuable pieces of property. You likely need commercial property insurance on its own, not as part of a BOP, so you can modify the coverage to meet your specific needs. If that’s you — whether you own a dentist’s office or a commercial kitchen — check whether your policy already includes business interruption insurance and talk to your insurer about adding it if it doesn’t.
Virtually all business insurance companies sell commercial property insurance and business owner’s policies. Get multiple quotes to see which policies include business interruption insurance and find coverage at the best price.
