What is the purpose of business interruption insurance?

Business interruption insurance is specifically designed to cover the financial losses that a business may suffer when it is unable to operate due to covered events, such as natural disasters, fires, or other disruptions. The primary purpose of this type of insurance is to provide compensation for the income that the business would have earned if it had not been interrupted. This income coverage helps businesses recover and survive financially during periods when they cannot operate, ensuring that they can maintain their obligations such as payroll, rent, and other operational expenses.

While property damage coverage addresses the physical loss of assets, business interruption insurance focuses on the economic impact stemming from those interruptions. The insurance is calculated based on expected revenue, making it an essential tool for businesses to ensure continuity and mitigate the negative consequences of unforeseen disruptions. This financial safety net is vital for maintaining stability and supporting recovery efforts.