How much does business interruption insurance cost?

Business interruption insurance covers lost profits, loan payments, and day-to-day operating expenses when you have to temporarily shut down your small business because of a covered peril.

Covered perils include fires, vandalism, and other causes of physical damage covered by your property insurance policy. One exclusion is pandemics, as business interruption coverage does not protect against communicable diseases.

The cost of adding business interruption insurance, also known as business income coverage, to your commercial property insurance or business owner's policy (BOP) varies significantly by business type and the risks you face.

The average monthly costs for commercial property and BOP policies are affordable for most small businesses:

• Commercial property insurance: $108 per month
• Business owner's policy: $83 per month

If you have expensive commercial property, operate in a high-risk industry, or earn significant revenue, you’ll likely need to pay more for business interruption insurance. If your business is small and low-risk, coverage will likely cost less.

Business interruption insurance helps cover lost income, rent or relocation costs, and other expenses when you must temporarily shut down your small business because of a covered physical loss.

Several factors influence the cost of business interruption insurance. Specifically, your insurance provider will look at:

• Commercial property value
• Annual revenue
• Industry risks
• Policy limits
• Claims history
• Business location
• Deductible
• Number of employees
• Types of coverage

When a covered incident forces your small business to close, business interruption insurance can cover lease payments and, if necessary, the cost of rent for a temporary location.

If your business occupies a valuable commercial property, your policy limit and premium will likely be higher to match the potential cost of a claim, and your payout will be higher if your business has to shut down.

Businesses that earn more will likely also have a higher premium. That's because business interruption insurance compensates small businesses for income loss due to a temporary shutdown from a covered loss.

While businesses with higher revenue pay more for coverage, they also receive greater compensation.

Your industry is another factor that will impact your business income insurance rates. Generally, high-risk industries pay higher premiums compared to low-risk industries.

For example, a retail store will likely pay a higher insurance premium than a consulting firm because retail stores require a physical location to bring in customers and carry a higher risk of insurance claims arising from fires and other incidents.

Companies can choose higher coverage limits on commercial insurance policies to potentially receive a higher payout on a claim and avoid out-of-pocket costs. But if you want more coverage, you’ll need to pay higher premiums.

Adding business interruption insurance to your commercial property insurance or business owner’s policy helps you scale your policies to fit your business needs.

Insurance providers often consider your previous claims to determine how risky you are to insure.

Any past claims history under your business interruption insurance policy will likely lead to a higher future premium.

Your insurer will also consider your geographical location when calculating your business interruption cost.

If your business property is prone to environmental risks that could cause extensive property damage, such as flooding or windstorms, you may have to pay more. Additional factors, such as local laws and land value, can also influence your premium.

Businesses closer to a fire station often have lower insurance rates because emergency response times are faster and the risk of significant fire damage is lower.

Policies with higher deductibles cost less, but you’ll have to pay that amount before you can collect on a claim.

Selecting a higher deductible is a simple way to save on your premium. However, choose one you can still afford, because if you can’t pay your deductible, you can’t collect on a claim.

The more workers you hire, the higher your business interruption insurance costs will likely be.

Business interruption coverage helps pay lost employee wages, which is why premiums tend to increase with a larger workforce and greater payroll. More employees equate to a higher payout, which typically means higher premiums.

The types of coverage you carry can impact your policy costs.

To increase coverage, you can add endorsements (also called riders) to your business interruption policy. For example, extra expense coverage can pay for less common expenses, such as hiring temporary workers during a shutdown.

You could also add contingent business interruption insurance, which covers financial losses when a primary partner or supplier is forced to close.

This will add more coverage and protection to your policy, but it will cost a bit more.

The restoration period is how long your business interruption policy covers your income losses. It usually begins after a waiting period (typically 24 to 72 hours) after your business is forced to close.

Your restoration period ends when the covered damage is repaired or within a reasonable amount of time that the repair should have been possible.

There are things you can do to keep your business interruption insurance policy costs low.

Some strategies include:

Lower your out-of-pocket insurance costs by shopping around and comparing quotes.

Different insurance providers offer varying rates, so comparing quotes and finding the best option for your unique business needs is a great way to save money.

When you purchase business interruption insurance, you can pay your premium in monthly or annual installments. Paying your premium annually usually costs less than monthly payments.

Choosing a higher deductible is an easy way to save on your premium, but make sure you can still afford it. If you can’t pay your deductible, you won't be able to collect on a business interruption claim.

Small, low-risk businesses may qualify for a business owner’s policy. A BOP bundles a general liability insurance policy with a commercial property insurance policy and costs less than purchasing the policies separately. You can add your business interruption coverage as an endorsement to your BOP.

If you do not qualify for a BOP, you can add business interruption coverage to your commercial property policy.

Small businesses with no previous claims on their insurance can expect to pay less for business insurance. While some business interruptions are inevitable, you can avoid claims by managing your risks.

This includes:

• Having regular building inspections
• Tightening workplace security by installing video cameras and alarm systems
• Installing fire alarms and fire suppression systems
• Implementing employee training on workplace safety protocols

TechInsurance is a trusted insurance expert for small businesses, including contractors and consultants, with extensive knowledge of the IT sector and beyond. We help small business owners get quotes from top-rated insurance companies, buy policies based on their business needs, and manage coverage online.

By completing TechInsurance's easy online application today, you can compare free quotes for commercial property insurance and other types of coverage from top-rated U.S. carriers. Our insurance agents are available to help answer any questions you may have.

Once you find the right policies for your small business, you can begin insurance coverage in less than 24 hours and get a certificate of insurance.

Insurance premiums vary based on the business insurance policies a business buys. View our small business insurance cost overview or find out the average costs for other common types of insurance.