Business Insurance
Business Interruption Insurance — what actually pays after a loss
Business Interruption (BI) replaces the income a business would have earned if a covered property loss had not interrupted operations. It is the line that most often determines whether a company survives a major loss — and the line where wording matters far more than limit.
Indemnity periods, dependent property, extra expense, and waiting periods — the four levers that decide whether BI actually pays.
What triggers business interruption coverage
BI responds when a covered cause of loss under your property policy causes a suspension of operations. The trigger is the property loss itself — a fire, a burst pipe, a wind event, a theft. No covered property loss, no BI recovery. That linkage is why coverage gaps on the property form (flood, earthquake, equipment breakdown) cascade directly into the BI side of the program.
Indemnity period — the most important number on the policy
The indemnity period is the maximum length of time BI will pay after a covered loss. Twelve months is common, but many businesses need 18 or 24 — anywhere there is a long lead time on equipment, permitting, or tenant improvements. Once the period ends, BI stops paying, even if you are still not back to pre-loss revenue.
Extensions that matter on real claims
- Extra expense — money spent above and beyond normal operating costs to keep the business running (temporary space, expedited shipping, overtime).
- Dependent property / contingent BI — losses caused by physical damage at a key supplier, customer, or attractor location.
- Civil authority — coverage when a government order denies access to your premises following a nearby covered loss.
- Ingress / egress — when you cannot reach your premises because of a nearby loss.
- Service interruption — utility (power, water, telecom) outages caused by physical damage to the utility's property.
- Leader property — losses caused by damage to a nearby anchor that drives your foot traffic.
Waiting periods, deductibles, and the 'period of restoration'
BI policies typically apply a waiting period (often 24, 48, or 72 hours) before coverage begins. Recovery is calculated against the period of restoration — the time it would reasonably take to repair, rebuild, or replace the damaged property — not the time it actually takes. If the insured drags rebuilding, the carrier still only owes the reasonable period.
Quick answers to the questions founders ask first.
How do we calculate the right BI limit?
Build a worksheet that captures projected revenue, continuing expenses (rent, debt service, salaried payroll, contracts), and the gross profit the company would have earned over the indemnity period. Carriers offer a BI worksheet that the underwriter expects to see at every renewal.
What is contingent business interruption?
It is BI triggered by physical damage at a property you do not own — most commonly a key supplier, customer, or shared attractor. We add it for manufacturers, distributors, restaurants, and any business with a single point of dependency in its supply chain.
Does BI cover the COVID-style loss of revenue?
Almost never. Pure income loss without underlying physical damage to property is excluded under nearly every commercial BI form, and the post-2020 case law has reinforced that. Pandemic-style coverage exists on a parametric or specialty basis; we can structure it separately if it fits.
How long should our indemnity period be?
We anchor it to the longest plausible rebuild scenario for the operation — typically 12 months for office and light-industrial; 18–24 months when permitting, custom equipment, or tenant improvements sit on the critical path.
Bring the lease, the loan covenant, or the renewal — we'll handle the rest.
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