Which type of loss would a business interruption policy cover?

A business interruption policy is specifically designed to cover the loss of income that occurs when a business is forced to close or reduce its operations due to damage from a covered peril, such as a fire or natural disaster. This policy compensates the business for the income it would have earned if the interruption had not occurred, helping to alleviate some of the financial strain caused by the business being unable to operate normally.

While damage to tangible property is certainly a valid concern for businesses and is typically covered under a property insurance policy, it does not specifically address the income loss that results from being unable to use that property. Personal injury claims from customers fall under liability coverage rather than business interruption coverage. Increased costs of working during a claim may also be covered under certain circumstances, but this is distinct from the primary function of a business interruption policy, which specifically targets the income loss due to halted operations. Therefore, the correct answer focuses on the direct financial impact of lost revenue due to business closure, which is the essence of what a business interruption policy aims to cover.