Even if your business has strong cybersecurity measures in place, you’re still connected to a larger digital ecosystem — vendors, software providers, data centers, payment processors, and cloud platforms. What happens if one of them suffers a cyberattack that disrupts your operations?
That’s where dependent business interruption (DBI) coverage comes into play. It’s a key — and often underappreciated — feature of many cyber insurance policies.
Dependent business interruption coverage (sometimes called contingent business interruption) protects your business from income loss caused by a cyber incident at one of your critical third-party providers.
In other words, even if your own systems aren’t directly breached or attacked, your business can still be financially impacted if a vendor you rely on can’t operate due to their own cyber issue.
This coverage helps replace lost income and cover extra expenses while your vendor or service provider restores their systems — helping your business stay stable even when the problem is out of your hands.
Dependent business interruption coverage generally applies to:
Service Provider Outages
If a company you rely on (like a cloud hosting provider or payment processor) experiences a system outage due to a cyber event, your policy can cover the income you lose during the downtime.
Supplier or Vendor Breaches
If a key supplier’s network is compromised and it prevents you from fulfilling customer orders or accessing needed materials, your policy may reimburse lost revenue or extra expenses.
Software Platform Disruptions
Many businesses rely on third-party software or SaaS platforms to operate daily. If one of those systems experiences a breach or shutdown, dependent business interruption coverage can help offset the financial impact on your business.
To make it clearer, here are a few examples of how dependent business interruption coverage could apply:
Example 1: Cloud Outage
A small e-commerce company hosts its website and order processing through a major cloud provider. The provider experiences a ransomware attack and takes its servers offline for several days. The e-commerce company loses sales during that time — DBI coverage can help replace that lost income.
Example 2: Software Vendor Breach
A manufacturing company uses third-party software to manage production schedules. When the software vendor is hit by a cyberattack, the system goes offline for a week, halting production. The manufacturer’s dependent business interruption coverage can help cover revenue lost during the shutdown.
Example 3: Payment Processor Failure
A restaurant chain uses a cloud-based point-of-sale system. When the POS vendor suffers a data breach, credit card transactions can’t be processed for several days. The restaurant chain’s dependent business interruption coverage helps recoup lost sales and ongoing operating expenses.
Today’s businesses depend on an extensive network of digital partners and suppliers. Even if you’re confident in your own cybersecurity, your operations are still vulnerable to others’ weaknesses.
Dependent business interruption coverage:
Closes a Critical Gap: It protects you from losses caused by third-party cyber incidents, which traditional business interruption policies usually don’t cover.
Provides Financial Stability: It helps keep revenue flowing when outside disruptions affect your business.
Enhances Risk Management: It acknowledges that in a connected world, your cybersecurity depends on more than just your own systems.
Cyber risk doesn’t stop at your network’s edge. Dependent business interruption coverage ensures that when your vendors or service providers face cyber trouble, your business doesn’t bear the financial fallout alone.
At Redwood Insurance Solutions, we help Michigan businesses understand how each part of their cyber insurance policy works — including the coverage that protects them from the risks they can’t directly control.