What is the definition of "business interruption insurance"?

Business interruption insurance is defined as coverage for loss of income that occurs when a business is forced to cease operations due to a covered event, such as a fire, natural disaster, or other circumstances that cause physical damage to the property and affect the ability to function. This type of insurance helps businesses recover lost income during the downtime, which can be critical for maintaining financial stability and meeting ongoing expenses, such as payroll, rent, and utilities.

Understanding this coverage is essential because it specifically addresses the financial impact of an interruption in business operations, rather than purely focusing on physical damage to the property, legal liabilities, or employee injuries. Other forms of insurance, while important, tend to address different aspects of risk management, making business interruption insurance particularly vital for maintaining the operational viability of a business after a disruptive incident.