Do your client understand business interruption coverage?
Do your client understand business interruption coverage?
Business interruption coverage can feel confusing until you break it down into simple terms. Here’s what really matters for a business owner who wants to stay protected.
What Business Interruption Coverage Does
It replaces income you lose when a covered event shuts down or slows your business operations. It keeps your business financially alive while you recover.
Covered events typically include things like fires, storms, or other property damage your policy insures. Cyber incidents may be included if you have specific cyber business interruption coverage.
What It Pays For
You would expect these categories to be covered:
• Lost net income that your business would have earned
• Continuing operating expenses like rent and payroll
• Extra expenses that help you reopen faster, such as temporary locations or equipment rentals
• Loan payments, taxes, and supplier contracts that do not stop just because you had a shutdown
Some policies also include coverage for:
• Loss of customers due to a long rebuild period
• Supply chain disruption if a key vendor suffers a loss (called Contingent Business Interruption)
Key Triggers To Understand
This coverage does not activate for every interruption. Common triggers:
• There must be direct physical damage to insured property
• A civil authority order restricts access to your business due to nearby damage
• A defined waiting period (often 48–72 hours) must pass before payments start
• Time limits cap how long benefits last (often 12–18 months)
If your downtime is caused by a utility outage, breakdown, or cyberattack without the right endorsements, you may find out there is no coverage when you need it most.
Common Gaps That Surprise Owners
• No coverage for pandemics unless specifically added
• Coverage limits too low for a long rebuild timeline
• Underinsuring revenue leads to reduced payouts
• No plan for data or system downtime
• Policy excludes dependent suppliers or key inventory sources
These gaps are what sink companies after a disaster. The insurance might exist, but not the right kind.
Why It Matters
Statistics consistently show that many businesses never reopen after a major disruption. Business interruption coverage buys you time and breathing room so a disaster does not become a permanent closure.
You want insurance to help you recover, not just repair what is broken.
