If you run a business in Colorado, it’s critical to understand what is covered by business interruption insurance and how it helps when disruptions hit. When your operations pause due to a covered event, you face lost income and ongoing costs. This is when business interruption insurance steps in to support your income, your fixed expenses and sometimes your extra recovery costs. In this guide, you’ll learn what’s covered by business interruption insurance, how it works in Colorado, and how to make sure your policy aligns with your risk.
Understanding Business Interruption Insurance
To begin with, you should know exactly what business interruption insurance is. It’s a product that bridges the gap between a physical loss (covered by property insurance) and the income you lose while your business cannot operate. For example, if a fire forces your business to close your storefront for repair, your property policy handles the damage while business interruption insurance helps replace lost revenue and cover costs you still incur.
In Colorado, your risk of weather-related damage or other disruptions can be higher than in some states. That makes understanding what is covered by business interruption insurance even more important.
What Is Covered by Business Interruption Insurance: Key Coverages
Here are the main elements of what’s covered by business interruption insurance that you want to track and verify with your agent.
- Lost Revenue: If your business cannot operate because of a covered peril you may receive compensation for the income you would have earned if operations had continued.
- Ongoing Fixed Costs: Expenses like rent or lease, utilities, taxes and payroll often continue even when your business is shut down. Business interruption insurance can cover these to keep you financially stable.
- Temporary Relocation Costs: If you must move operations to a temporary facility while your main location is repaired you may get coverage for those additional expenses.
- Employee Wages & Retention Costs: Some policies include payroll or retention costs so you can keep your staff and resume quicker after closure.
- Extra Expenses to Minimize Interruption: If you incur costs above your normal operating expenses (for example, renting alternative equipment or speeding up repairs) these may be covered.
- Contingent Business Interruption: If a supplier or key client suffers a covered disruption and that impacts your operations, some policies cover this risk.
How This Applies in Colorado
When you ask yourself what’s covered by business interruption insurance in Colorado, the answer must reflect the local environment. Colorado businesses face hazards like wildfires, hailstorms, heavy snow and flooding in some regions.
A business interruption policy in Colorado will typically require a covered event that causes a physical loss or damage before it activates. That means if the damage triggers your business closure then the coverage can respond. Also, your indemnity period (the time the policy will pay) and your coverage limits matter. Some policies offer coverage up to 12 months or more depending on your business recovery timeline.
What’s Not Covered by Business Interruption Insurance
Equally important when understanding what is covered by business interruption insurance is knowing what isn’t included in the policy. Some common exclusions in Colorado include:
- Closures due to a pandemic or virus unless you purchase a special endorsement.
- Losses where there is no physical damage or the peril is not covered by your property policy (for example flood or earthquake if they are excluded).
- Utility outages off your premises or other indirect disruptions not defined in the policy.
- Pre-existing financial decline or negligence that leads to interruption.
Knowing both what is covered and what’s not helps you assess whether your business interruption insurance fills the gap for your business.
Example: How Coverage Works for a Colorado Business
Imagine you operate a retail store in Denver and a hailstorm bursts through your roof. The storm is a covered peril under your property policy. Your store must close for three weeks for repairs. While closed your sales stop but rent, utilities and payroll still continue. Because you have business interruption insurance you receive payment for the revenue you would have earned during those three weeks. You also receive support for your fixed costs and for renting a temporary location to resume sales earlier. Without this coverage you would have faced zero income while still paying expenses.
This example shows what is covered by business interruption insurance when properly structured for your business.
How to Make Sure Your Coverage Matches Your Needs
When you review a business interruption policy for your business, you should walk through these steps:
- Assess your revenue streams and calculate how much income you would lose if you were closed for 1-3 months.
- List your fixed costs (rent, utilities, taxes, payroll) that continue during closure.
- Identify how long you might need to restore operations after a major event (your indemnity period).
- Review whether your policy includes temporary relocation, extra expenses, contingent interruption or extended indemnity.
- Ask your agent how your policy defines “covered event”, “interruption”, “indemnity period” and whether exclusions apply.
- Confirm endorsements for local risks (wildfires, hail, supply chain disruptions) are addressed.
Why Clear Understanding Matters
Understanding what is covered by business interruption insurance helps you avoid surprises when a loss occurs. If you assume coverage and later discover exclusions you face large gaps in protection. With the right knowledge you can select a policy aligned to your risk and ensure your business has a fighting chance to recover after disruption.
Working with Riverbend Insurance
At Riverbend Insurance we provide tailored business insurance solutions in Colorado. We help you review your operations, identify risk exposures and secure policies that reflect your business model and geography. Using our experience you gain clarity on business interruption insurance and what you must handle separately. Contact us today to talk to our team of experts.