What would happen to your business if a fire, flood, or major equipment failure forced you to close for weeks — or months? For most businesses, the answer is devastating. Business interruption insurance is the coverage that keeps your company financially alive while you rebuild.
What Business Interruption Insurance Covers
Business interruption (BI) insurance, sometimes called business income insurance, compensates your business for lost revenue and continuing expenses when a covered peril forces you to suspend operations. It covers lost net income based on your prior financial performance, ongoing fixed expenses like rent and loan payments, payroll for key employees you want to retain, and extra expenses incurred to speed up recovery — like renting a temporary location.
How the Waiting Period Works
Most business interruption policies have a waiting period — typically 72 hours — before coverage kicks in. This means small, short-term closures are generally not covered. For longer outages, BI insurance can be the difference between recovering and closing permanently. The indemnity period — the length of time BI will pay — is equally important. Many businesses underestimate how long recovery takes and select indemnity periods that are too short.
Contingent Business Interruption
Contingent business interruption (CBI) coverage extends your BI protection to losses caused by disruptions at a key supplier or customer. If your primary supplier suffers a fire and can’t deliver materials you need to operate, CBI can cover your resulting income loss. For businesses with complex or specialized supply chains — natural products manufacturers, specialty food companies, and custom fabricators — CBI is particularly important.
What BI Insurance Does Not Cover
Standard BI policies do not cover losses from pandemics (COVID-19 litigation reinforced this exclusion industry-wide), utility outages not caused by a covered peril, or supply chain disruptions not covered by your specific policy. Understanding your policy’s triggers and exclusions before a loss is essential. Bozzuto Group reviews your BI policy language as part of every commercial insurance program review.
Is Your Business Interruption Coverage Adequate?
Many businesses carry BI limits set years ago that no longer reflect their current revenue or operating costs. Contact Bozzuto Group for a BI coverage review — we’ll make sure your limits and indemnity period are aligned with your actual financial exposure.