Connect with Our Team

Business Interruption Insurance Essentials

September 18, 2026
Property Risk Management
6 min read
Cliff Sexton, Director of Complex Property Claims and CAT Response
A Guide to Business Interruption Insurance

Table of Contents

    Key takeaways

    • Review your business interruption (BI) coverage before disaster strikes
    • BI claims only apply when covered physical damage forces your business to pause
    • Update property values, BI worksheets, and loss scenarios at every renewal so your coverage matches current revenue, expenses, and risks

    This article is a 2026 update of a piece originally published in July 2024.

    Unexpected events can bring even the strongest business to a standstill. After one of your best quarters, a wildfire could destroy your warehouse and inventory overnight. A hurricane could tear through your hotel, damage the roof, and force you to close for weeks, resulting in millions of dollars in lost revenue.

    That is where business interruption (BI) insurance comes in. Included as part of many commercial property insurance policies, BI coverage can be a lifeline when disaster strikes. By helping replace lost income and cover ongoing expenses during a shutdown, it enables businesses to recover and get back to normal operations faster.

    Here is what you need to know about business interruption coverage — and how to make sure your business is prepared when the unexpected happens.

    What is business interruption (BI) insurance and what does it cover?

    When disaster strikes, business interruption (BI) insurance can help your company recover by replacing lost income and covering ongoing operating expenses during a period of suspended operations. Depending on the policy and the circumstances of the loss, coverage may extend to:

    • Temporary relocation costs if the business must operate from another location
    • Extra expenses incurred to maintain operations and minimize the impact of the shutdown
    • Employee wages and payroll expenses
    • Loan and debt payments that continue while operations are paused
    • Other covered costs, subject to the specific terms, conditions, and limits of the policy

    To trigger BI coverage, the business income loss must stem from a covered property damage event that disrupts normal operations.

    What events can trigger BI coverage?

    Business interruption (BI) risks can arise from a wide range of events — from heavy rainfall causing water damage and a week-long shutdown to catastrophic wildfires that disrupt operations for months. In recent years, some of the most significant BI losses have resulted from:

    • Wildfires
    • Severe weather events, including hurricanes, floods, and freezes
    • Civil unrest and riots
    • Fires and explosions
    • Tornadoes
    • Equipment and machinery failures

    Business interruption coverage is rarely straightforward. Each of these perils can affect your operations differently, and policy provisions, exclusions, and coverage triggers can significantly impact the outcome of a claim. By collaborating with an experienced property insurance specialist, you can better understand the complexities of your policy and confirm your business is prepared for potential disruptions.

    Four key steps to take before a BI loss

    Preparing for a business interruption (BI) loss before it occurs can be just as important as how you manage the claim afterward. Taking proactive steps can help maximize recovery, minimize disruptions, and position your organization for a smoother claims process.

    Review the business interruption section of your property insurance policy

    • Seek input from your broker, underwriter, risk management team, and legal counsel to confirm you fully understand your coverage (including terms, conditions, limitations, and exclusions).
    • Evaluate whether the coverage, limits, and policy language adequately protect your business in the event of a significant disruption.
    • Consider multiple loss scenarios and how policy wording may be interpreted under various circumstances.

    Understand property and business interruption values

    Accurate valuations are essential to securing the appropriate amount of coverage.

    • Insurers typically require a statement of values (SOV) and BI worksheet prior to renewal. Because values cannot be adjusted retroactively after a loss, it is important to review and update them regularly.
    • Reassess property values, revenues, expenses, and other BI-related exposures at each renewal to account for inflation, acquisitions, operational growth, and changing business conditions.
    • Make sure location-specific allocations accurately reflect revenues and expenses to support probable maximum loss (PML), maximum foreseeable loss (MFL), and catastrophe exposure analyses.
    • Conduct “what-if” scenario planning to quantify potential financial and operational impacts. For example, if one call center becomes inoperable, can operations be shifted to another location? If a distribution center is damaged or flooded, can shipments be redirected elsewhere?
    • These analyses, combined with guidance from your broker and risk advisors, can help determine the appropriate BI coverage structure and limits for your organization.

    Establish claims management protocols, disaster recovery, and contingency plans

    A well-developed response plan can significantly reduce downtime and improve claim outcomes.

    • Collaborate across departments to identify how the organization will respond to a disruptive event.
    • Develop documented claims management procedures to ensure you capture and preserve critical information from the outset of a loss.
    • Create disaster recovery and business continuity plans that prioritize employee safety, customer service, and operational resilience.
    • Define roles, responsibilities, and communication protocols so key personnel can respond quickly and effectively when an incident occurs.

    Build your team

    Assemble your team before a loss occurs so that everyone is prepared to act immediately when needed.

    Internal team

    • Risk management
    • Operations
    • Finance
    • General counsel/legal department

    External team

    • Insurance broker
    • Forensic accountant
    • Engineer and/or contractor
    • Outside coverage counsel (if internal counsel is unavailable)
    • Named adjuster

    If your organization has the ability to do so, consider establishing a named adjuster before a loss occurs. A pre-selected adjuster, agreed upon by both the policyholder and insurer, can provide continuity, expedite the claims process, and bring valuable knowledge of your business and operations to the adjustment process.

    By taking these steps before a disruption occurs, organizations can strengthen their resilience, improve claim outcomes, and recover more quickly when a business interruption loss occurs.

    Ten tips for navigating business interruption claims

    The actions you take in the days immediately following a business interruption event influence the outcome of your claim. The following 10 strategies can help streamline the process and position your business for a successful recovery.

    1. Act quickly and engage the adjuster early

    Following a loss — especially a catastrophe (CAT) event — time is critical. Contact your insurer immediately and request that the adjuster meet with your team as soon as possible. Early engagement can help establish momentum and prevent delays.

    2. Foster a cooperative relationship

    Set a collaborative tone from the outset. Provide the adjuster with reasonable access to the property, documentation, and personnel needed to evaluate the loss. Transparency and responsiveness can help build credibility and trust throughout the claims process.

    3. Take ownership of your claim

    Do not rely solely on the insurer to calculate the loss. Assemble your own team of specialists including forensic accountants, engineers, contractors, and legal advisors to independently measure and support the claim. The responsibility for presenting and documenting the claim ultimately rests with you.

    4. Develop a clear claim strategy

    Determine your desired outcome early in the process. For example:

    • Will you rebuild at the same location or relocate?
    • Do you plan to restore the facility to its previous condition or make operational improvements?
    • What additional costs could be incurred by these strategic business decisions?

    Understanding your objectives from the beginning will help guide claim preparation and settlement discussions.

    5. Establish effective communication protocols

    Maintain clear and consistent communication with the adjuster. Document all meetings, conversations, and agreements, and follow verbal discussions with written confirmation via email. Thorough documentation helps avoid misunderstandings and creates a clear record of decisions.

    6. Schedule regular claim review meetings

    For large or complex losses, establish recurring meetings with the adjuster and key stakeholders. Regular status updates can help identify issues early, maintain alignment, and keep the claim moving forward.

    7. Request interim payments when appropriate

    Do not wait until the claim is fully resolved to address cash flow needs. Submit well-supported requests for interim payments or advances as expenses are incurred. In some cases, developing preliminary or pro forma claim calculations can help secure funding necessary to maintain operations during recovery.

    8. Communicate your recovery plan

    Develop a clear rebuilding and business restoration strategy and share it with the adjuster. A well-documented plan helps support the period of restoration, anticipated expenses, and business interruption calculations.

    9. Avoid surprises

    Keep the adjuster informed of major developments, operational changes, and significant decisions throughout the recovery process. Consistent communication reduces disputes and promotes efficient claim handling.

    10. Obtain pre-approval for significant expenses

    Whenever possible, seek insurer approval before incurring major mitigation, restoration, or extra-expense costs. Pre-approval can help avoid disagreements over coverage and reimbursement later in the claims process.

    Strategies to help settle a BI claim

    Business interruption claims are among the most complex property insurance claims. They involve projections, assumptions, historical performance analysis, and numerous hypothetical scenarios. Successfully resolving a BI claim requires careful documentation and a willingness to negotiate.

    Start by developing a thorough understanding of both your policy and the specific circumstances surrounding the loss. Every aspect of the claim needs credible documentation and objective evidence. At the same time, it is important to understand the insurer's perspective, recognizing both the strengths of your claim and the areas where questions or challenges may arise.

    The more comprehensive and well-supported your claim submission, the greater the likelihood of a timely and favorable resolution.

    Documentation commonly requested by insurers

    To substantiate a business interruption claim, insurers frequently request:

    • Profit and loss (P&L) statements
    • Sales and production records
    • Purchase orders
    • Customer invoices
    • Payment records, including credit card statements and canceled checks
    • Payroll records
    • Budgets, forecasts, and historical financial data
    • Tax returns
    • Lease agreements
    • Contracts and other business agreements

    Depending on the nature of the loss, additional documentation may be required to quantify damages and support the claim.

    Negotiating a settlement

    When settlement discussions begin, focus on resolving disagreements one issue at a time. Areas of agreement can often create momentum and foster a more productive negotiation environment. In many cases, compromise allows both parties to reach a practical resolution more efficiently.

    If neither side is willing to compromise, the claim may proceed to appraisal, arbitration, or litigation — processes that can be costly, time-consuming, and disruptive to ongoing business operations.

    A credible, well-documented claim improves the likelihood of recovery and helps accelerate payment by reducing friction throughout the adjustment process.

    Recover stronger with BI insurance

    Whether the disruption results from a natural disaster, equipment failure, fire, or another covered event, a business interruption loss does not define your organization's future.

    By understanding your coverage, planning ahead, assembling your team beforehand, and implementing proven claim management strategies, you can improve recovery outcomes and strengthen your resilience. With preparation, you can emerge stronger and better positioned for future success.

    Learn more about business interruption insurance. For questions or more information on BI, you can reach a specialist through our secure contact form.

    Frequently asked questions about business interruption insurance

    Business interruption insurance replaces lost net income and pays ongoing operating expenses when covered physical damage forces your business to suspend or reduce operations. Often built into a commercial property policy, it covers costs like payroll, rent, and loan payments during the period of restoration, the stretch of time you need to repair and reopen. Brown & Brown specialists help you confirm your coverage matches your revenue and risk exposure.

    Business interruption insurance covers the net income you lose plus the fixed costs you still owe while operations pause. That usually means payroll, rent or lease payments, taxes, and continued loan payments. Many policies add extra expense coverage, which funds the added costs of keeping your business running, like renting temporary space or expediting equipment. Coverage varies widely by policy, so review your specific terms, conditions, and limits carefully before you need them.

    Yes, most policies require direct physical loss or damage from a covered peril before coverage begins. That said, many policies extend coverage through endorsements when the damage happens somewhere else. Common examples include civil authority coverage (a government order blocks access), ingress/egress coverage (you can't reach your premises), and utility service interruption. Read your endorsements closely, because these extensions often decide whether an off-site event still triggers your claim.

    Business interruption coverage is intended to reimburse lost net income and continuing operating expenses during the period of restoration. Expenses that stop during the shutdown, such as production costs, inventory purchases, and other non-continuing expenses, are typically excluded from the claim calculation because they were not incurred. Common examples include sales commissions, raw materials or inventory purchases, and shipping costs. 

    Insurers use forensic accountants to calculate your loss by projecting the income you would have earned during the restoration period, including ongoing operating expenses. That projection often considers seasonality, growth trends, and market shifts. Coverage terms, documentation, and the length of the restoration period all influence the final calculation. 

    Insurers start with your core financial records: profit and loss (P&L) statements, tax returns, payroll records, invoices, and budgets or forecasts. From there, the supporting details often decide the outcome. Management commentary explaining unusual months, signed contracts showing booked revenue, and expense breakdowns that separate continuing costs from those that stopped all strengthen your case. Clean, well-organized records signal a credible claim and help speed up payment.

    Coverage runs for the “period of restoration,” meaning the reasonable time to repair the damage and resume operations, not necessarily the day revenue fully recovers. Some policies may provide additional coverage for extended business income loss. Permitting delays, contractor backlogs after a widespread catastrophe, and supply shortages can all stretch recovery well beyond initial estimates.

    Notify your insurer promptly and start a dedicated loss log that tracks damage, decisions, and dollars separately from routine bookkeeping. This habit helps turn a chaotic recovery into a documented, defensible claim. Photograph conditions, keep receipts, and record why each expense supports your recovery. Specifics beat estimates when negotiating with an adjuster.

    About the author

    Cliff Sexton has worked in complex property claims management for more than 20 years. He helps lead resolution of large-scale property losses, including business interruption claims, and works with customers to reduce claims costs and minimize business disruption.