What Is Business Interruption Insurance?
Damage to your premises is one problem; the income lost while you can't trade is another. Business interruption cover is designed for the second.
When a fire, flood or storm damages a workplace, property insurance can help repair the building and replace equipment. But while the repairs happen, the business may not be able to trade — and rent, salaries and loan repayments keep falling due. Business interruption insurance is designed to help with that gap.
What it typically covers
Policies differ, but business interruption cover is commonly designed to help with:
- income the business would reasonably have earned during the interruption;
- ongoing fixed costs such as rent, loan payments and payroll;
- extra expenses incurred to keep operating, such as a temporary location.
How it is usually triggered
In many policies, business interruption cover only applies when the interruption is caused by physical damage from a risk the property policy covers. That is why it is often sold as an add-on to commercial property insurance rather than on its own. Always check the wording of the trigger in your policy.
Key terms to understand
- Indemnity period: the maximum length of time the policy will pay for. Recovery can take longer than expected, so this deserves careful thought.
- Waiting period: a set time after the event before cover starts.
- Sum insured: the limit, often based on your gross profit or revenue estimates — under-estimating can leave you under-insured.
Common exclusions
Policies frequently exclude or limit certain events, and some risks need separate cover. Read the exclusions section carefully and ask the insurer or broker to explain anything unclear, particularly around supplier failures, utility outages and wide-scale events.
Is it right for your business?
Businesses that depend on a physical location, specialised equipment or a few key suppliers tend to be most exposed. Our guide to choosing business insurance walks through how to assess your risks, and the article on cover for temporary and contract workers looks at another area employers often overlook.
General information only. Policy terms vary widely — speak to a licensed insurance broker or adviser before buying cover.