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Business Interruption Insurance

Updated 09:54 AM EST, Mon April 29, 2019

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What Is Business Interruption Insurance?

Business interruption insurance helps cover your lost income and additional expenses if your business is impacted by a covered loss. It is a type of business insurance and is also known as business income insurance. This coverage can help pay bills, cover payroll expenses, and replace your income if you can’t operate your business.
 
For example, say the wind from a powerful storm knocks down a tree and it falls on the building housing your business. Your business has to remain closed while repairs are being made. Your business interruption coverage can help cover your lost income, as well as pay the rent or mortgage.
 
Business interruption insurance is generally included in a business owner’s policy, or BOP. A BOP also includes commercial property and general liability coverages. A BOP combines these three insurance coverages into one convenient policy.
 

What Does Business Interruption Insurance Cover?

A business interruption policy can help cover a variety of things to keep your business going, even if the physical location is closed from a covered loss. These include:
 
  • Revenue. If your business is closed, that means you may be losing out on sales. This coverage can help replace the lost revenue you’d normally see if your business was open.
  • Mortgage/Rent/Lease Payments. Whether you own or rent the space where your business is located, business income interruption coverage can help cover the mortgage or rent payments.
  • Loan Payments. If you have any upcoming loan payments, this coverage can help pay the bill.
  • Taxes. Whether your business pays taxes monthly or quarterly, they still have to be paid. This coverage can help cover the tax bills.
  • Payroll. If you have employees, you still have to pay them even if the business isn’t operable. This coverage can make sure your employees are paid by helping cover the costs.
  • Relocation. If your business has to move to a new or temporary location because of the physical damages, this coverage can help cover the costs.

How Much Business Interruption Insurance Coverage Do I Need?

How much business interruption insurance coverage you need varies from company to company. A good rule of thumb is to look at projections for your business. A realistic estimate for future business profits can be used to help you determine how much business interruption insurance coverage you need.
 
There is a coverage limit with business interruption insurance. That’s why it’s important to choose the right amount of coverage. The coverage limit is the highest amount your insurer pays for a covered peril or loss. You would be responsible for any costs that exceed the limit.
 
Here are some things to consider when figuring out how much coverage you’ll need:
 
  • Use your business’s gross earnings to come up with an estimated business profit.
  • A coinsurance penalty can be applied if your business was under-insured. This means an insurance company can apply a penalty on the claim amount paid.

How Much Does Business Interruption Insurance Cost?

The cost of business interruption insurance depends on a number of factors. These include:
 
  • The industry your business is in
  • The number of employees you have
  • How much coverage you choose
The cost can also vary depending on your business’s location and its risk of a covered loss. For example, if your business is located in an area that has dry conditions and has an increased risk of a wildfire, you may pay more for business interruption insurance. Or if your business is located near a coastline, it could be at an increased risk of storm surge damages. So you may pay more than a business owner located farther inland and above flood areas.
 

Business Interruption Insurance Exclusions

Business interruption insurance doesn’t cover everything. Here are some examples of what the insurance doesn’t cover:
 
  • Items broken after a covered loss. If an item is damaged or breaks after your business experiences a covered loss, business interruption insurance won’t cover it. Business property insurance would help cover damaged property.
  • Flood or earthquake damage. You can purchase a separate policy to help protect your business from flood or earthquake damage. A traditional Business Owner’s Policy does not include flood and earthquake damage as a covered cause of loss.
  • Undocumented income. If your business’s financial records are incomplete, there may not be coverage for some of your business income loss.
  • Utilities. Your business interruption insurance may not cover utilities because they’re typically turned off if the business isn’t operable.

How to Get Business Interruption Insurance

Getting the right business interruption insurance policy can help you keep up with extra expenses if your business is forced to close after a covered loss.
 
When the unexpected happens, The Hartford’s business interruption insurance coverage helps protect the business you worked hard to build. Our team can provide answers to your business interruption insurance questions – get a quote today.
 

Certain coverages vary by state and may not be available to all businesses. All Hartford coverages and services described on this page may be offered by one or more of the property and casualty insurance company subsidiaries of The Hartford Financial Services Group, Inc. In TX, this insurance is written by Sentinel Insurance Company, Ltd., Hartford Casualty Insurance Company, Hartford Lloyd’s Insurance Company, Property and Casualty Insurance Company of Hartford, Hartford Underwriters Insurance Company, Twin City Fire Insurance Company, Hartford Accident and Indemnity Company and Hartford Fire Insurance Company. In CA by Sentinel Insurance Company, Ltd. (CA license # 8701) and its property and casualty insurance company affiliates, One Hartford Plaza, Hartford, CT 06155.
 
The Hartford® is The Hartford Financial Services Group, Inc. and its property and casualty subsidiaries, including issuing company, Hartford Fire Insurance Company. Its headquarters is in Hartford, CT.