What is Business Interruption Coverage?

In our latest blog series, we’ve been exploring the basics of insurance policies like business owner’s and commercial property insurance. Often included in these policies is something a bit trickier to understand: business interruption insurance.

Often considered interchangeable with business income coverage, business interruption insurance is a form of property insurance that covers a loss of income due to a slowdown or suspension of operations caused by damage to the business’s property. This coverage is bundled within commercial property insurance because while loss or damage to property can be detrimental enough on its own, damage that also results in a loss of income can be even more so.

If your business is damaged due to a covered peril, such as fire or vandalism, business interruption insurance will cover, based on financial records of the business, lost profits, rent, payroll, fixed costs, and other expenses necessary to keep the business running as it was before the damage occurred. This coverage ought to continue until the business operates under the same conditions as it did prior to the damage.

Purchasing business interruption insurance may also involve drafting a business continuity which details a business’s ability to recover from damage and minimize interruption of business activities. The right business interruption coverage for your firm may also include endorsements for interruption due to damage suffered by suppliers, customers, manufacturers, or partners, extra expense coverage, and utility services.

There are clearly a lot of factors to consider when deciding on the right property insurance for your company. Figuring out the appropriate business interruption coverage and business continuity plan for your business will require a skilled broker.