Business interruption insurance
The cover that decides whether a business reopens.
Business interruption covers lost income and continuing expenses while a business cannot trade following a covered loss. It is frequently the most valuable cover in a commercial programme and the first one cut to reduce a premium.
It is also the most misunderstood, because two of its settings do almost all the work and neither is obvious from a summary.
What it pays
Broadly, the income the business would have earned, plus the expenses that continue whether or not you are trading — rent, loan payments, key salaries.
The intention is to put the business roughly where it would have been, rather than to fund everything spent during the disruption.
Extra expense cover, often included alongside, pays the additional costs of keeping going — temporary premises, expedited deliveries, hired equipment. For many businesses that is the more immediately useful half.
It generally needs physical damage
This is the point that surprises people most. Business interruption usually responds only where there has been direct physical damage from a covered peril, at your premises.
A collapse in trade with no physical damage behind it is generally outside the cover, however severe. So is a loss caused by something excluded — flood being the routine example.
Some policies extend to damage elsewhere: at a supplier, at a customer, or where access to your premises is prevented. Those extensions are specific, limited, and worth asking about by name rather than assuming.
The period of restoration
This is the limit that actually constrains most claims. Cover runs for the time reasonably required to repair or replace the damaged property — not until customers come back.
So a business whose trade recovers slowly after reopening is generally not covered for that tail, even though the loss is real and directly caused by the event.
Some policies extend the period for a defined additional time after reopening. Where trade would take a while to rebuild, that extension is one of the more valuable things to add.
The waiting period
Most policies apply a waiting period before the cover begins, functioning like a deductible measured in time rather than money.
Short interruptions therefore produce nothing, which is by design: the cover exists for serious events rather than for a bad afternoon.
The length varies and is worth knowing, because it determines the shortest disruption the policy will ever respond to.
Setting the limit
The figure is derived from what the business earns rather than from what it owns, which is why property limits are no guide to it.
Work from revenue and continuing expenses over a realistic recovery period, and be honest about how long rebuilding actually takes — permits, lead times and contractor availability are usually the slow parts rather than the work itself.
Businesses consistently under-estimate the time. A limit set against an optimistic rebuild is the most common way this cover disappoints.
Common questions
Generally not. It usually requires direct physical damage from a covered peril, so a fall in trade with no physical damage behind it is normally outside the cover.
For the period of restoration — the time reasonably required to repair or replace the damaged property. It does not usually run until trade has recovered, though some policies extend for a defined time after reopening.
Most packages include it alongside property and general liability. Whether the limit and the period suit your business is a separate question from whether it is present.
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This page is general information, not advice about your specific circumstances. A licensed insurance professional can tell you what’s actually available to you.
General information only, not insurance advice. Coverage, availability, and terms vary by insurer and by state, and are subject to underwriting. Quote My Policy LLC is a licensed insurance producer. Nothing here binds coverage.