Waiting Period (Business Interruption)
The Waiting Period in business interruption insurance is the amount of time that must pass after a covered loss before your insurance company begins paying for lost business income. Also called a deductible period or time deductible, waiting periods typically range from 24 to 72 hours, though some policies have longer periods.
What You Need to Know
The waiting period is essentially a time-based deductible that delays when your business interruption coverage begins paying. During the waiting period, you're responsible for covering all your expenses and lost income yourself. The waiting period serves similar purposes to a property deductible — it reduces small, frequent claims and lowers your premiums, while ensuring coverage applies to more substantial business interruption losses.
The premium trade-off: longer waiting periods mean lower premiums since the insurer's exposure is reduced, while shorter waiting periods mean higher premiums since insurance starts paying sooner. Most restaurant owners choose 72-hour waiting periods as a middle ground between cost and protection.
Why It Matters for Restaurant Owners
Understanding your waiting period is critical for financial planning because you need sufficient cash reserves to cover expenses during that initial period after a loss. If your policy has a 72-hour waiting period and a fire forces you to close for two months, you won't receive any insurance payments for the first three days — you're responsible for all expenses and lost income during that time.
What you must cover during the waiting period:
- Lost revenue — all income you would have earned
- Continuing expenses — rent, utilities, insurance premiums
- Payroll, if you continue paying employees
- Loan payments and perishable inventory replacement
The key is ensuring your financial resources match your waiting period — don't select a long waiting period just to save premium dollars if you can't afford to self-insure that period.
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