Does Business Interruption Insurance Pay if Your Business Has to Close?
Learning goal: Know what business interruption (business income) coverage generally pays, what usually has to happen for it to apply, and what to check in your policy.
Short answer
It can, if the closure is caused by a covered loss. Business interruption, or business income, coverage replaces lost revenue when your business has to shut down because of fire, wind damage or another covered loss. A closure for a reason the policy doesn't cover generally isn't paid, so the trigger matters as much as the amount.
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The Fuller Picture
The coverage follows the property claim: a covered loss to the business's property shuts it down, and the policy replaces income lost while it's repaired, within its limits and time period. It's often part of a business owners policy. Closures without that kind of loss, and losses the policy excludes, are where expectations and coverage most often differ.
Key Takeaways
- The Insurance Information Institute: business interruption "replaces lost revenues in the event that your business has to shut down due to fire, wind damage or other covered losses."
- It's often included in a business owners policy, alongside property and liability coverage.
- If the cause of the closure isn't a covered loss, the coverage generally doesn't apply.
- Policies typically limit how long income is paid and may require a waiting period before payments start. Check both.
- Good records of normal revenue make a claim easier to document.
Real-World Example
A kitchen fire and a slow month
Rosa's café earns about $30,000 a month. A covered kitchen fire closes it for two months. Her business owners policy includes business income coverage, so it would generally pay the income she lost during repairs, based on her records and subject to the policy's limit and terms. Later that year, a road closure outside slows business for a month, but nothing at the café was damaged. Because no covered loss caused that slowdown, her business income coverage generally wouldn't pay for it.
Common Mistakes
- Assuming the policy pays for any drop in revenue.
- Not knowing the waiting period and the maximum time income is paid.
- Keeping poor revenue records, which makes a claim hard to document.
Interactive Exercise
Check your business income coverage
Use your business owners policy or business property policy.
Tick each step as you do it. Your checklist is saved in this browser.
Knowledge Check
Question: A covered fire closes a shop for six weeks. What is business interruption coverage generally designed to pay?
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Questions to explore next
Questions readers often ask next about this topic:
- How is lost income calculated?
- Does business interruption cover payroll?
- What if the closure is ordered by the city?
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The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- Understanding business owners policies (BOPs)Insurance Information Institute (Triple-I)
Educational information, not advice: This lesson is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers. What business interruption coverage pays and its link to covered losses come from the Insurance Information Institute.