Business interruption insurance — also called business income coverage — reimburses lost income and covers extra expenses when a business is unable to operate due to a covered property loss. Coverage includes net income that would have been earned, continuing fixed expenses (rent, payroll, utilities), and extra expenses incurred to minimize the period of restoration. Coverage is typically included as part of a commercial property policy rather than purchased separately.
Any business that would suffer financially from an interruption in operations. This is especially critical for businesses with high fixed costs, seasonal revenue patterns, or single-location dependency. Manufacturing companies, restaurants, retailers, and healthcare facilities face the highest business interruption exposure. Companies with complex supply chains should also consider contingent business interruption coverage.
Business interruption coverage pays for the period of restoration — the time from the loss until the business returns to normal operations or the time that 'would reasonably be required' to restore operations. Coverage typically includes a waiting period (usually 72 hours) before coverage begins. Extended business income coverage continues for a period (typically 60-365 days) after restoration to account for the ramp-up period as customers return.
Business interruption limits should be based on projected income and expenses for the estimated maximum period of restoration (usually 12-18 months). Coinsurance or monthly limit of indemnity provisions apply. Waiting periods typically range from 24 to 72 hours. Extra expense coverage may have a separate limit. Premium is based on revenue, industry, building construction, and catastrophe exposure.
A restaurant suffered a kitchen fire that required 6 months of repairs. The business interruption coverage paid $85K/month in lost income for 6 months ($510K total), plus $120K in extra expenses for temporary relocation to a pop-up location — keeping 42 employees on payroll and maintaining customer relationships during the rebuild.