What is covered under "business interruption" insurance in a commercial property policy?

Business interruption insurance in a commercial property policy specifically addresses the financial losses a business incurs when it is forced to close temporarily due to a covered loss, such as a fire, flood, or other insured event. This type of insurance is crucial because, during the closure period, the business may not generate any revenue, yet it is still responsible for ongoing expenses like rent, utilities, and payroll.

The coverage provided under business interruption insurance typically includes the loss of net profit that the business would have earned had the interruption not occurred, as well as fixed costs that must be paid even when the business is not operational. This financial safety net allows businesses to manage losses and recover more effectively from disruptive incidents.

Other options, such as loss of physical assets due to theft or vandalism, focus on tangible property damage and are covered under standard property insurance rather than business interruption. Costs related to legal defense against lawsuits pertain to liability coverage, not business interruption. Similarly, replacement cost for damaged physical property addresses physical damage rather than the income lost during a business interruption, which is the primary focus of business interruption insurance.