What Is Business Interruption Insurance and What Does It Cover?

A fire, flood, break-in, or major equipment failure can bring your business to a halt. Property insurance may help rebuild walls and replace equipment, but it does not pay your rent, wages, or lost profits during downtime. That is where Business Interruption Insurance comes in — helping you stay financially stable when you cannot operate.

This type of coverage is designed to replace lost income and cover ongoing expenses after a disruption caused by a covered physical event. The goal is to keep your business solvent while you recover, so you can reopen without having to start from scratch.

What Business Interruption Insurance Pays For

If your business is forced to close due to a covered peril like fire, water damage, or vandalism, the policy may reimburse you for several essential financial losses.

For example:

Lost net income based on past performance
Fixed operating costs that continue during closure, like rent, insurance, or utilities
Employee wages, allowing you to retain your team during downtime
Loan payments, taxes, or lease obligations
Relocation costs if you need to temporarily move operations elsewhere

These costs are not theoretical — they continue whether or not your revenue does. Business interruption insurance helps you cover them while you work on recovery.

Expense Type	Covered by Business Interruption?	Notes
Lost revenue	Yes	Based on historical income
Employee payroll	Yes	For full-time and key part-time staff
Office rent or lease	Yes	Only for the insured premises
Moving to a temporary site	Sometimes	If required by the insurer and pre-approved
Repairs to equipment	No	Covered by property insurance instead
Extended marketing campaigns	No	Business interruption does not cover new growth

Coverage usually begins after a short waiting period (often 48 to 72 hours) and ends once your business resumes normal operations, up to your policy’s limit or time frame.

What This Insurance Does Not Cover

This type of insurance is not designed to cover every loss. It only applies when a covered physical event forces your operations to stop.

It does not cover:

Revenue losses from pandemics or disease outbreaks unless specifically added
Voluntary shutdowns, even for financial or staffing reasons
Slowdowns or reduced traffic — full or near-total interruption is required
Damaged property or inventory (that is covered under separate property insurance)

Caution: Policies differ on what qualifies as a “covered peril.” Always confirm whether events like floods, power outages, or government orders are included in your coverage.

When This Coverage Matters Most

Business interruption coverage becomes especially important for:

Retailers or restaurants who depend on daily foot traffic
Professional offices with regular client flow and payroll commitments
Service-based businesses that cannot relocate or operate remotely
Businesses with long leases or fixed costs that cannot be paused during closure

Even a short shutdown can mean tens of thousands of dollars in lost revenue. Having coverage in place allows you to focus on reopening, not worrying about how to pay your bills in the meantime.

Tip: Combine this insurance with property and equipment breakdown coverage to create a complete financial safety net. Business interruption fills the gap between physical damage and economic recovery.

Business Interruption Keeps Your Business in Business

Damage to your workspace does not just affect your surroundings — it affects your revenue, team, and future plans. Business interruption insurance helps carry your business through the financial gap caused by downtime. It protects what property insurance cannot: your ability to keep going.