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Written byBen Luthi
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Ben LuthiInsurance Writer
Ben Luthi is a Utah-based insurance writer for Compare.com. With more than a decade of experience covering various insurance and personal finance topics, Ben is passionate about helping people make smart decisions with their money. His work has appeared on a variety of well-known personal finance websites, including the Wall Street Journal, Fortune, Credit Karma, Yahoo! Finance, Experian, NerdWallet, Insurify, and many more.
Ben has been writing for Compare.com since 2025.
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Edited byNick Versaw
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Nick Versaw leads Compare.com's editorial department, where he and his team specialize in crafting helpful, easy-to-understand content about car insurance and other related topics. With nearly a decade of experience writing and editing insurance and personal finance articles, his work has helped readers discover substantial savings on necessary expenses, including insurance, transportation, health care, and more. As an award-winning writer, Nick has seen his work published in countless renowned publications, such as the Washington Post, Los Angeles Times, and U.S. News & World Report. He graduated with Latin honors from Virginia Commonwealth University, where he earned his Bachelor's Degree in Digital Journalism.
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In This Article
Unexpected disruptions can cripple small businesses, especially when fixed costs like payroll and rent don’t stop during downtime. That’s where business interruption insurance comes in. It helps replace lost income and cover ongoing expenses when your business operations are forced to pause after a covered event.[1]
Whether you own a storefront, operate a small manufacturing company, or work as an independent contractor, this coverage can mean the difference between reopening and shutting down for good.
Here’s what you need to know about how it works, how much it costs, and how to get coverage.
Key Takeaways
Business interruption insurance replaces lost income and covers ongoing expenses when operations are temporarily halted due to property damage or other covered events.
Coverage limits depend on your operating costs, business size, and how long restoration might take.
Business interruption insurance is usually part of a business owners policy (BOP) rather than a stand-alone policy.
Business Interruption Insurance Explained
Business interruption insurance, also known as business income insurance, covers your income and operating expenses if you’re unable to operate due to property damage or another covered disruption.
This coverage is typically bundled within a BOP. This insurance package combines property insurance, general liability insurance, and income coverage in one policy. A BOP protects your business property and equipment while providing liability protection and business income replacement if you’re forced to shut down temporarily.[2]
In short, it helps you maintain financial continuity while you repair, rebuild, or relocate after an unexpected loss.
Who Needs Business Interruption Insurance?
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Any business that relies on a physical location, equipment, or consistent operations should consider business interruption insurance. That includes retail shops, small manufacturers, and service providers with leased offices.
If a fire, flood, or other disaster forces you to close, your business interruption insurance helps keep income flowing while covering expenses like payroll, lease payments, and utilities.[3] Freelancers and remote workers may have less need for this coverage unless they depend on specialized business property or work from rented office space.
Determining how much business interruption insurance you need
Calculating the right coverage limit takes a little math and a close look at your finances:
Estimate your annual gross revenue.
Make projections about your future earnings and expenses.
Divide by 12 to estimate your monthly business income loss, then multiply by the number of months you expect recovery or restoration to take.
For example, if your business brings in $600,000 annually, you might need at least $300,000 in coverage for a six-month shutdown.
What Business Interruption Insurance Covers
Business interruption insurance steps in when your business is forced to temporarily close due to property damage or another covered peril. It helps pay the bills that don’t stop even when you can’t operate.
Typical covered expenses include:
Lost profits: Replaces lost business income based on historical financials
Payroll: Keeps employees paid during downtime
Lease payments: Covers rent or mortgage obligations for your business location
Temporary relocation expenses: Covers moving and setup costs if you must operate from a new location
Other operating expenses: With extra expenses coverage, you may also get funds to replace hardware, technology, furniture, leasing equipment, and other operating expenses
Taxes and loan payments: Ensures you stay up to date on fixed obligations
What business interruption insurance doesn’t cover
While business interruption insurance fills many gaps, it doesn’t cover everything. These are some standard business interruption insurance exclusions:
Pandemics or viral outbreaks: Most policies exclude pandemic-related losses. You’d need a separate endorsement or specialized coverage.
Property damage not covered by your policy: If your property insurance policy doesn’t cover the cause of property damage (like flooding), business income coverage won’t apply.
Utility outages off premises: Unless you have a power outage endorsement, your coverage typically excludes losses from external utility failures.
Data breaches or cyberattacks: These require a cyber liability policy.[4]
Government orders not tied to property damage: Civil authority coverage applies only when access to your property is restricted due to nearby damage, not general mandates.
Always review your business income coverage page and policy exclusions on your declaration page to understand what’s included.
Business Interruption Insurance Costs
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On average, small businesses pay between $40 and $130 per month ($480–$1,560 annually) for business interruption coverage, depending on their location, industry, and coverage needs.
Lower-risk businesses, like real estate agents or consultants, tend to pay less because they face fewer physical hazards and have more flexibility to operate from another location.
Higher-risk industries, such as restaurants, manufacturers, and retailers with expensive machinery or large inventories, usually pay more due to higher exposure to property damage and operational disruptions.
Factors affecting business interruption insurance costs
Your business interruption insurance premium depends on several key risk factors, including
Business location
Areas prone to natural disasters or high crime typically face higher rates.
Industry and operations
Riskier environments with heavy equipment or flammable materials cost more to insure.
Revenue and payroll
Higher business income and staffing levels mean greater exposure for insurers.
Coverage type and limits
Broader protection and higher limits increase premiums.
Claims history
A record of frequent or costly claims can lead to higher premiums.
Restoration timeline
Businesses that would take longer to reopen after damage may need higher coverage limits.
How to Get Affordable Business Interruption Insurance
Because rates can vary significantly among insurance companies, comparison shopping is key to finding the right business interruption policy for your budget.
Here’s how to get coverage:
Assess your coverage needs. Review your operating costs, property value, and recovery time estimates.
Gather documentation. Insurers may require recent financial statements, payroll data, and lease agreements.
Request multiple quotes. Compare rates and coverage limits from several insurers before choosing a policy.
Consider bundling. Adding business interruption coverage to your BOP or property insurance policy often reduces costs.
Review your policy annually. Adjust your limits as your business grows to ensure your coverage keeps pace with your needs.
The best approach to affordability is balancing your coverage limit and premium. Cutting corners can lead to not having enough insurance when you need support most.
Business Interruption Insurance FAQs
If you’re evaluating business interruption policies, check out the additional information below.
What’s an example of a business interruption insurance claim?
A fire damages your restaurant’s kitchen, forcing closure for two months. In this instance, the policy covers lost profits, payroll, and rent during the restoration period.
How much does business interruption insurance cost?
Most small businesses pay between $480 and $1,560 per year, depending on their size, risk level, and coverage needs.
What’s the most common cause of a business interruption?
Fires, storms, and other property damage events are the leading causes of interruptions and claims.
What qualifies as a business interruption?
A covered event that forces you to temporarily suspend normal operations — such as fire, storm damage, or a covered equipment breakdown — qualifies as a business interruption.
What’s the waiting period for business interruption insurance?
Most policies include a waiting period of 48–72 hours before coverage begins.
What’s the primary benefit of business interruption insurance?
Business interruption insurance keeps your business financially stable by replacing lost income and covering fixed expenses during downtime. This protection can be critical to maintaining continuity and avoiding long-term financial setbacks after a major disruption.
What’s another name for business interruption insurance?
Business interruption insurance is often referred to as business income insurance or income coverage.
Does business interruption insurance have a deductible?
Instead of a traditional deductible, most policies use a waiting period, which is the number of days before coverage kicks in. That waiting period typically ranges from 48 to 72 hours, depending on your insurer and policy.
Does business interruption insurance cover power outages?
Business interruption insurance only covers power outages if the outage results from property damage at your location or if you’ve added a utility services endorsement to your policy. Otherwise, losses from off-site utility failures are generally excluded from coverage.
Sources
- Insurance Information Institute. "Do I need business interruption insurance?."
- Insurance Information Institute. "What does a business owners policy (BOP) cover?."
- Insurance Information Institute. "Business Income (Interruption) Insurance: Key Facts."
- Insurance Information Institute. "Cyber insurance: a key part of a robust business strategy."
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Ben LuthiInsurance Writer
Ben Luthi is a Utah-based insurance writer for Compare.com. With more than a decade of experience covering various insurance and personal finance topics, Ben is passionate about helping people make smart decisions with their money. His work has appeared on a variety of well-known personal finance websites, including the Wall Street Journal, Fortune, Credit Karma, Yahoo! Finance, Experian, NerdWallet, Insurify, and many more.
Ben has been writing for Compare.com since 2025.
Nick Versaw leads Compare.com's editorial department, where he and his team specialize in crafting helpful, easy-to-understand content about car insurance and other related topics. With nearly a decade of experience writing and editing insurance and personal finance articles, his work has helped readers discover substantial savings on necessary expenses, including insurance, transportation, health care, and more. As an award-winning writer, Nick has seen his work published in countless renowned publications, such as the Washington Post, Los Angeles Times, and U.S. News & World Report. He graduated with Latin honors from Virginia Commonwealth University, where he earned his Bachelor's Degree in Digital Journalism.
