Business Interruption (BI)
Business interruption (BI) insurance, also called business income coverage, is property coverage that typically pays lost net income and continuing expenses while a covered physical loss, such as a fire, suspends operations. It generally requires direct physical damage to trigger.
Last updated October 13, 2026
How business interruption works
BI is usually part of a commercial property program or a businessowner's policy. It generally pays net income the business would have earned plus normal continuing expenses, such as rent, payroll, loan payments, and taxes, during the period it takes to repair or replace the damaged property. It depends on the underlying property policy: if the cause of the damage is not covered there, the BI loss usually is not covered either.
- Period of restoration: begins when covered damage suspends operations and ends when the property is repaired, or reasonably could have been.
- Waiting period: many policies apply a waiting period, commonly somewhere between 24 and 72 hours, or a dollar deductible.
- Extra expense: costs reasonably incurred to reduce downtime, such as a temporary location.
- Extended business income: optional coverage for a set time after operations resume.
- Civil authority: may respond when a government order blocks access after nearby damage, usually for a short period.
Coverage limits can be written as a dollar amount, a period of time, or a combination, and some policies scale the payout to insurance-to-value requirements. It is worth modeling how long a realistic rebuild would take, since the restoration period, not just the limit, drives the outcome.
Example
A hypothetical hardware company's assembly space is badly damaged by fire. The property policy funds repairs. After the waiting period, BI pays the net income the company would have earned and continuing costs like rent and salaried payroll while the space is rebuilt, and extra expense helps pay for a temporary facility. The amounts depend on the limit, documentation, and policy wording.
Business interruption vs. related terms
- Property damage coverage. Property insurance pays to repair or replace damaged buildings and equipment. BI pays the income lost while operations are suspended. Both are first-party coverages, and BI usually depends on the property coverage responding first.
- Contingent business interruption. Contingent business interruption responds when damage at a supplier's or customer's location, not yours, disrupts your income. Standard BI is tied to damage at your own premises.
- Extra expense. Extra expense pays costs to reduce downtime, such as a temporary location. It is often part of the BI form but may have its own limit.
- Cyber business interruption. A cyber policy may pay lost income from a security event or system failure under its own triggers, waiting period and exclusions. That is separate from a property BI form.
- Valuation of damaged property. BI does not use actual cash value or replacement cost, which value physical property. It measures lost income and continuing expenses.
A second example: a cloud outage with no physical damage
A hypothetical software company's hosted application goes down for two days because its cloud provider has an outage. Nothing at the company's own offices is damaged. A standard property BI form usually requires direct physical loss or damage, so it may not respond. A cyber policy might respond if it includes system failure or dependent business interruption coverage, subject to a waiting period, limits and the exact definition of the covered event. The policy wording, not the type of outage alone, decides.
What to watch for
- Physical damage trigger. Most BI forms require direct physical loss or damage from a covered cause.
- Exclusions. Viruses and pandemics are commonly excluded, and flood or earthquake losses generally need separate coverage.
- Documentation. Insurers typically ask for financial statements, sales records, and payroll to support the claim.
- Limits and time caps. A limit set too low, or a short restoration period, can leave a gap on a long rebuild.
Why it matters for technology, AI, fintech and digital-asset companies
A software outage, cloud provider failure, or cyber event usually is not a direct physical loss, so a property BI form may not respond. Cyber policies often address system interruption separately, with their own triggers and waiting periods. Hardware and data center operators depend on suppliers, so contingent business interruption is worth considering. See property coverage, cyber coverage, and physical AI and hardware.
Questions to ask your broker or underwriter
- Does the form require direct physical loss, or are there extensions for other triggers?
- How is the period of restoration defined, and is there extended business income after operations resume?
- What are the waiting period and the deductible, and are they time-based or dollar-based?
- Is coverage for losses at suppliers, customers or other dependent locations included, and at what sublimit?
- How are payroll and other continuing expenses treated, and does the policy limit payroll in any way?
- Does a coinsurance condition or a monthly or time-based limit apply to the BI coverage?
- Which exclusions could remove the loss, such as pandemics, flood or earthquake?
- What financial records will the insurer ask for to support the claim?
Common mistakes
- Setting the limit from revenue. BI is generally based on net income plus continuing expenses, so the limit should reflect those figures over a realistic restoration period.
- Underestimating rebuild time. Specialized equipment and permitting can lengthen downtime well beyond what the company first assumes.
- Assuming BI covers cyber or cloud outages. A property form usually needs physical damage, so confirm what the cyber policy offers.
- Overlooking suppliers. If one vendor or single location supports the business, ask about dependent property coverage.
- Weak records. Claims turn on financial documentation, so keep statements, sales and payroll organized before a loss.
- Missing the waiting period. A long waiting period can mean the first days of downtime are uninsured.
How business interruption shows up for fast-growing companies
Technology businesses often depend on a small number of facilities, cloud providers or manufacturers, so a disruption can come from outside the company's walls. Companies with long equipment lead times, such as hardware makers and compute-heavy AI firms, may need a longer restoration period than the form assumes by default. See AI and emerging tech companies for how these dependencies appear, and compare the property wording described on our property coverage page with the system interruption wording on the cyber coverage page.
See how this applies in practice: data center insurance guide and data center insurance for operators and builders.
Related terms
Frequently asked questions
What is business interruption insurance?
Business interruption (BI) insurance, also called business income coverage, is property coverage that typically pays lost net income and continuing expenses while a covered physical loss, such as a fire, suspends operations. It generally requires direct physical damage to trigger.
Does business interruption cover a cyberattack or cloud outage?
A standard property BI form usually does not, because it requires direct physical loss or damage. Cyber policies often include separate business interruption or system failure coverage with different triggers, waiting periods, and limits. Read the exact definitions in each policy.
What are the period of restoration and waiting period?
The period of restoration is the time BI can pay, from the suspension of operations until property is or reasonably could be repaired. The waiting period is a delay, commonly 24 to 72 hours depending on the form, before coverage begins or before it applies back to the start.
Does business interruption insurance cover pandemics?
Typically not. Many property and BI policies contain exclusions for viruses, communicable disease, and pandemics, and BI generally requires physical damage. Some policies differ, so review the wording and any endorsements rather than assuming.
How is a business interruption loss calculated?
Typically it starts with the net income the business would have earned during the period of restoration, then adds normal continuing expenses such as rent, payroll and loan payments. The insurer usually asks for financial records to support the figures, and the exact method depends on the policy wording.
Does business interruption insurance cover employee wages?
It can, as part of continuing expenses during the period of restoration. Some forms limit or exclude certain payroll, or apply conditions, so check how ordinary payroll is treated in your policy.
Is business interruption insurance part of a general liability policy?
No. It is first-party property coverage, typically included in a commercial property policy or a businessowner's policy. General liability responds to claims against the company by others.
Does business interruption coverage apply if my supplier is shut down?
Only if the policy includes contingent or dependent business interruption coverage for that situation. Standard BI is tied to damage at your own premises, so ask about dependent property coverage and its limits.
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