Published: 24 October 2024

Business interruption insurance: Recover from unexpected loss

Have you considered what would happen if your business operations were halted due to a fire or natural disaster? Business interruption insurance can help keep your doors open. Here’s how this insurance works.

Unexpected losses due to a serious accident, natural disaster or other insurable events can make it challenging to keep your business running smoothly. This can be a stressful time for business owners and a major concern is often meeting ongoing financial obligations.

Business interruption insurance provides critical business continuity cover (like staff wages and loan payments) while your business is temporarily closed or operating at a reduced capacity. This safety net can reduce stress and help you focus on the rebuild and recovery.

Business interruption insurance can provide critical business continuity cover including:

Loss of insurable income and gross profit

Ongoing operating expenses such as wages, electricity, rent or loan payments

Temporary relocation costs

Professional assistance (such as a forensic accountant) to quantify your loss and assist with claim preparation and settlement.

The insurable events that could trigger a business interruption claim include:

Accidental or malicious damage

Fire damage

Extreme weather events

Natural disaster

Theft or burglary

Is your indemnity period sufficient?

The indemnity period is the maximum time (usually between 12 and 36 months) your insurer can cover your fixed expenses and insurable gross profit while your business operations are temporarily halted due to an insurable event. Setting the right indemnity period is crucial to ensure your business has enough time to rebuild and recover.

Understand policy exclusions

It’s important to be aware that business interruption insurance often comes with excesses, and limits on cover. Make sure to check with your broker to understand your policy exclusions. For example, a business interruption policy is unlikely to cover:

Losses or interruptions caused directly or indirectly by cyber events including any action taken to control, prevent, suppress, or remediate any cyber act