Business interruption coverage

Business interruption coverage is a type of commercial property insurance that reimburses lost income and extra expenses when covered events, such as fire or hurricanes, temporarily halt business operations. Policies calculate loss by analyzing historical revenue, fixed costs, and ongoing payroll for businesses like restaurants and retail stores.

Covered perils typically include fires, windstorms, thefts, and vandalism, but exclude floods and earthquakes without specific endorsements. Claims require documentation including profit-and-loss statements and tax returns from previous months or years, as explained by the Insurance Information Database.

Coverage periods–called “period of restoration”–begin after a waiting period (usually 48–72 hours) and last until repairs complete or the policy limit ends. Extra expense coverage pays for temporary locations or equipment rental costs needed to resume operations quickly.

Civil authority coverage compensates businesses, such as hotels and gyms, for government-mandated shutdowns following nearby property damage. Business interruption endorsements often set daily or total maximum limits ($10,000–$100,000), so precise policy wording matters.

Common exclusions include pandemics (COVID-19 losses largely denied in U.S. Courts), utilities failures off-premises, and voluntary closures.

Insurers base premiums on factors like annual gross earnings, industry type (restaurants face higher risk than offices), location ZIP codes with disaster histories, and desired coverage duration.