What is Business Interruption Insurance?
Business Interruption Insurance is designed to protect businesses from financial loss due to interruptions in their operations caused by events like fires, natural disasters, or other unforeseen disruptions. While standard property insurance covers physical damage to the business’s property, Business Interruption Insurance covers the loss of income during the period of recovery.
This type of insurance ensures that a business can continue to pay bills, wages, and other operational costs while unable to operate normally. For example, if a restaurant is forced to close due to fire damage, Business Interruption Insurance would cover the lost income during repairs and the associated expenses, like temporary relocation costs.
Business Interruption Insurance is crucial for businesses that rely on physical locations or regular operations to generate revenue. Without it, an unexpected event could result in a financial crisis, potentially causing a business to close permanently.
Policies typically cover the time it takes to restore business operations to their pre-disruption state, often called the “restoration period.” Some policies may also include coverage for additional expenses incurred to speed up recovery.