When a disaster strikes your business — a fire, a flood, a major equipment failure — the physical damage is only part of the problem. While your premises are being repaired and your equipment replaced, your business may be unable to trade. Revenue stops. Fixed costs continue. Staff still need to be paid. This is precisely the scenario that business interruption insurance is designed to address.
What Is Business Interruption Insurance?
Business interruption insurance — sometimes called business income insurance or consequential loss insurance — covers the financial losses your business suffers when it cannot operate normally following an insured event. While your property insurance covers the physical damage to your building and contents, business interruption insurance covers the resulting loss of income during the period it takes to get back on your feet.
What Does Business Interruption Insurance Cover?
- Loss of gross profit or revenue — the income your business would have earned during the interruption period.
- Fixed operating expenses — ongoing costs such as rent, loan repayments, and utilities that continue even when you cannot trade.
- Wages — employee wages during the interruption period, helping you retain your team.
- Additional increased cost of working — extra expenses incurred to minimise the impact of the interruption, such as renting temporary premises or equipment.
How Long Does Business Interruption Cover Last?
Business interruption policies have an indemnity period — the maximum length of time the insurer will pay out for business losses. Common indemnity periods are 12, 18, or 24 months. It is critical to choose an indemnity period that genuinely reflects how long it would take to get your business fully operational again after a worst-case scenario, including delays in obtaining approvals, sourcing materials, and rebuilding your customer base.
Many business owners select a 12-month indemnity period to keep premiums down — but seriously underestimate how long a major rebuild actually takes. An experienced broker will help you think through this carefully.
Does Business Interruption Insurance Cover Pandemics?
The COVID-19 pandemic raised significant questions about business interruption coverage in Australia. Most standard business interruption policies require physical loss or damage to property to trigger cover, which meant many businesses were not covered for pandemic-related closures. Some policies have been updated to clarify this exclusion. It is important to understand exactly what triggers your policy and what exclusions apply.
Talk to HC Insurance About Business Interruption Cover
Business interruption insurance is one of the most complex covers in a business insurance program, and getting it wrong can be catastrophic. At HC Insurance, our brokers will help you calculate the right sum insured, select an appropriate indemnity period, and ensure your policy is structured to genuinely protect your business when the unexpected happens. Contact us today.