Frequently Asked Questions
What does business interruption insurance cover?
Lost net income, continuing fixed expenses (rent, payroll, loan payments), and extra expenses to relocate or restart after a covered property loss (fire, storm, etc.). It does NOT cover pandemic-related shutdowns unless specifically endorsed.
How much business interruption coverage do I need?
Calculate 12-18 months of gross profit + continuing expenses. Use historical financials and account for the time needed to rebuild and resume operations. The standard restoration period is 12 months but extended periods of indemnity (18-24 months) are recommended.
Why was COVID-19 not covered by business interruption?
Most policies require "direct physical loss or damage" to property. Courts have overwhelmingly ruled (Hartford, Cincinnati Insurance cases) that virus contamination doesn't qualify. Many policies added explicit virus exclusions after SARS in 2003-2006.
What is the indemnity period?
It is the maximum time the insurer pays lost income, counted after the waiting period. 12 months is the standard and roughly matches the typical rebuild time after a loss. For businesses with long recovery times (manufacturing, restaurants) consider 18-24 months.
Why is coverage based on gross earnings and not revenue?
Because a shutdown does not relieve you of every cost. Gross earnings = net profit + continuing operating expenses (rent, payroll, debt). Insuring gross sales over-insures you, because it includes costs like raw materials and shipping that stop during a real pause.
What is Contingent BI and why do I need it?
Contingent BI covers losses when a key supplier or customer shuts down, not your own operation. It is critical for businesses with a concentrated supply chain. The pandemic showed how factory closures in Asia can paralyze U.S. companies, and standard BI does not apply.
Is the shortest 24-hour waiting period worth it?
Usually not. Most outages and closures resolve in under 24 hours, so the extra premium is rarely justified. A 72-hour waiting period (the standard) offers the best balance between useful coverage and premium cost.
Does BI cover pandemics or civil-authority closures?
Only if the event causes direct physical damage to your property or is explicitly included. After COVID, many insurers exclude viruses and pandemics. Civil Authority coverage usually requires the order to stem from nearby physical damage (fire, storm) rather than public health. Check with your agent.
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This calculator provides estimates based on general assumptions. Actual insurance costs and coverage vary by insurer, location, and individual risk factors. Not a quote or binding offer. Contact insurance providers directly for accurate quotes and coverage options.