Most founders focus insurance planning on protecting against liability claims — harm done to others as a result of their business. Business interruption insurance addresses a different risk: the financial impact on the business itself when something goes wrong that prevents it from operating normally. Understanding what it covers helps founders assess whether it is relevant to their situation.
Business interruption insurance covers the loss of income a business suffers when it is unable to operate as a result of an insured event — such as a fire, flood, or other physical damage to the premises or equipment. It covers the revenue that would have been earned during the period of interruption, helping the business meet its fixed costs and maintain financial stability while it recovers. The policy typically pays out for a defined period following the triggering event.
Business interruption insurance is most relevant for businesses whose ability to trade depends on access to specific premises or equipment. Home-based or digital businesses with fewer physical dependencies may have less exposure. The scope of cover — what triggers a claim and for how long — varies between policies and should be checked carefully. Our guide to business interruption insurance explains what it covers and when to consider it.