Great question — understanding the coverage gaps in Business Interruption Insurance is essential so you’re not caught off guard when disaster strikes. Even with a solid policy, there are some common exclusions and limitations that can affect small businesses the most.
🚫 Coverage Gaps in Business Interruption Insurance
1. No Coverage for Non-Physical Damage
Business interruption coverage is triggered by physical loss or damage (like fire, hurricane, etc.).
You won’t be covered for:
- Cyberattacks (unless you have separate cyber insurance)
- Utility outages (unless added by endorsement)
- Pandemics (COVID-19 revealed this gap)
2. Virus and Pandemic Exclusions
Most standard BI policies explicitly exclude viruses and communicable diseases.
This means interruptions due to:
- COVID-19 shutdowns
- Quarantine orders
- Disease outbreaks
…are not covered, unless you’ve purchased a rare endorsement or specialized coverage.
3. Utility Service Interruptions
Power, water, gas, or internet service disruptions typically aren’t covered unless caused by a covered physical loss to your property.
You may need a “Utility Services – Time Element” endorsement for this.
4. Waiting Period Deductibles
There’s usually a waiting period (often 48–72 hours) before coverage kicks in.
That means:
- Any loss during that window is on you.
- The longer your waiting period, the more money you could lose out on.
5. Inadequate Policy Limits
If your coverage limit is too low, you might:
- Run out of funds before you reopen
- Be forced to cover the difference yourself
Tip: Your policy should cover 6–12 months of expenses, depending on your risk.
6. Contingent Business Interruption (CBI)
Standard BI does not cover income loss caused by disruptions to:
- Suppliers
- Manufacturers
- Key customers
To be protected, you need CBI coverage, which covers indirect losses due to issues at third-party locations.
7. Government Shutdowns (Civil Authority Orders)
Coverage for government-mandated closures:
- May only apply if there’s physical damage nearby (e.g. your street is blocked after a neighboring building fire)
- Is usually limited to 2–4 weeks depending on your policy
8. Partial Operations
If your business is partially open (e.g. takeout only for a restaurant), your insurer might:
- Reduce your claim, arguing that you’re still earning revenue
- Expect you to mitigate losses, or they may reduce payouts
9. Lack of Extra Expense Coverage
BI covers income loss, but not necessarily the extra costs to keep running (e.g. renting a temp location or paying overtime).
To fill this gap, you need to add Extra Expense Coverage.
🔐 How to Close These Gaps
- Talk to your broker about endorsements that can add coverage for:
- Utility service interruption
- CBI (supplier/customer loss)
- Extra expense
- Cyber events
- Regularly update your policy limits as your business grows
- Keep solid financial records to speed up claims and avoid disputes
Would you like a quick checklist of common coverage gaps to review with your insurance agent? Or maybe help drafting some questions to ask them?
