When disaster forces your restaurant to close - fire, flood, storm damage - the physical damage is just the beginning. Lost revenue during closure can be devastating, especially for businesses with high fixed costs. Business interruption insurance covers this lost income, helping you survive until you can reopen.
What Business Interruption Covers
- Lost net income: The profit you would have earned if open
- Continuing expenses: Fixed costs that continue during closure (rent, loan payments, insurance)
- Payroll: Keeping key employees on staff during closure
- Relocation costs: Expenses to operate from temporary location
- Extended period: Ramp-up period after reopening while business returns to normal
How Business Interruption Works
Coverage Trigger
Business interruption requires a covered physical damage claim. If fire damages your kitchen and you close for repairs, BI covers your lost income. If you close for non-damage reasons (pandemic, supply shortage), standard BI doesn't apply.
Waiting Period
Most policies have a waiting period (typically 24-72 hours) before coverage begins. This functions like a deductible for time-based losses.
Period of Restoration
Coverage continues for the time reasonably required to repair or rebuild, typically up to 12 months. Some policies include 'extended period of indemnity' to cover the ramp-up period after reopening.
Frequently Asked Questions
How much business interruption coverage do I need?
Calculate your expected annual revenue minus variable costs (food, hourly labor) that would stop if you closed. Consider how long repairs could take - 6-12 months for major damage. Your coverage limit should cover that period. Work with your accountant and broker to determine the right amount.