What are variable costs under a business interruption insurance?

Variable costs under a business interruption insurance policy refer to expenses that fluctuate based on the level of business activity. These may include costs such as raw materials, utilities, and direct labor that are incurred as the business operates. In the event of a disruption, understanding variable costs helps businesses estimate their losses and determine the amount of coverage needed to maintain operations during recovery. The policy typically covers lost income and ongoing expenses, including these variable costs, to help the business recover financially.