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What is covered by business interruption insurance?

By Alliant

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The range and scale of events with the potential to disrupt a business's operations are steadily increasing. These events range from cyber attacks, natural disasters, fires and accidents, to unforeseen events like civil disruptions - whether at home or abroad - that may affect the supply chain. Such interruptions can result in significant financial losses, encompassing both lost revenue and ongoing expenses.

In 2020, 28% of breaches affected small businesses, according to Verizon’s Data Breach Investigations Report. Most breaches were linked to attacks on web applications—roughly 43%

While disruptions to a business's well-being can be caused by a variety of circumstances or events, business continuity is critical in all instances. Just one brief business interruption can be incredibly costly for an organization, often leading to serious reputational damages or long-term closures.

Data from FEMA shows that 90% of businesses fail within a year if they are unable to get back up and running within five days after a disaster. The longer recovery takes, the more likely a business will have to permanently shut its doors. 

How can businesses cover financial losses resulting from disruptions to their operations?  Business interruption insurance is a critical safeguard for businesses of all sizes, offering financial protection in the event of unforeseen disruptions that can impede normal operations.

Key business interruption insurance coverages

Lost Revenue Compensation: Compensates for lost income or revenue during the period when business operations are disrupted due to a covered event. This is designed to maintain cash flow and meet financial obligations.

Operating Expenses Coverage: Covers the ongoing operating expenses the business incurs even when its operations are temporarily halted or reduced due to a covered event. Common expenses include rent, utilities, salaries and other fixed costs.

Extra Expenses Coverage: Addresses additional costs a business incurs to continue operations or minimize the impact of the disruption. It covers expenses necessary to resume normal operations as quickly as possible, such as temporary relocation costs or increased costs for expedited services.

Contingent Business Interruption Coverage: Protects against losses resulting from disruptions in the operations of suppliers, customers or other key business partners. If a covered event affects these third parties and, as a result, disrupts the insured business, this coverage compensates for the resulting losses.

Civil Authority Coverage: Provides coverage for losses incurred due to government actions which prevent or restrict access to the insured premises, affecting the business's operations. This coverage helps when access is limited due to actions by civil authorities following a covered event.

Service Interruption Coverage: Addresses losses resulting from disruptions in essential services such as power, water, gas or communication services that impact the business's ability to operate. It helps cover the losses and additional costs associated with such interruptions.

Dependent Properties Coverage: Covers losses arising from damage to or the unavailability of a dependent property or location the business relies on for its operations. It ensures compensation for the resulting business interruption.

Supply Chain Disruption Coverage: Focuses on disruptions in the supply chain that affect the availability of necessary materials or goods from suppliers. It provides compensation for losses and additional expenses associated with supply chain disruptions.

Loss of Attraction Coverage: Covers losses resulting from a decline in business due to a nearby covered event, even if the insured business itself is not directly affected. For example, if a major attraction or neighboring business experiences a disaster that causes a decline in the insured business's customers or revenue.

How Can Alliant Help?

Companies that are assessing business interruption insurance coverage should collaborate closely with a specialized insurance broker. Alliant has the expertise and experience to ensure your business continuity program is comprehensive, forward-thinking and tailored to the specific needs of your business. We work together with our clients to evaluate potential risks, determine adequate coverage limits and facilitate effective communication with insurers to help ensure the best coverage available in today’s market.


Alliant note and disclaimer: This document is designed to provide general information and guidance. Please note that prior to implementation your legal counsel should review all details or policy information. Alliant Insurance Services does not provide legal advice or legal opinions. If a legal opinion is needed, please seek the services of your own legal advisor or ask Alliant Insurance Services for a referral. This document is provided on an “as is” basis without any warranty of any kind. Alliant Insurance Services disclaims any liability for any loss or damage from reliance on this document.