What is “business interruption insurance” designed to do?

Business interruption insurance is specifically designed to provide financial support to businesses when they experience a temporary closure due to a covered event, such as a fire, natural disaster, or other crises that interrupt normal operations. The key function of this type of insurance is to compensate for lost income during the period of interruption, ensuring that the business can continue to meet its financial obligations, such as rent, payroll, and other operating expenses, even though it is not generating revenue.

Unlike property insurance, which deals with physical damages to the business property, business interruption insurance focuses on the financial impact of the interruption rather than physical assets. This coverage becomes especially crucial for maintaining cash flow and preserving the economic viability of the business during challenging times. While other types of insurance address specific risks—such as fraud, theft, and worker injuries—business interruption insurance is unique in its focus on income protection during disruptions to business operations.