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If a fire, storm or burst pipe shuts your doors, business interruption insurance deals with the months of trading you lose, and it matters most when rent and loan repayments keep falling due. Two settings decide whether it works. The sum insured is usually built from gross profit figures your accountant can supply, and the indemnity period has to cover rebuilding, refitting and winning customers back. Fortis Risk Solutions works through both with you, compares how insurers define gross profit and checks the extensions for supplier failure and loss of access. After a loss, we help you prepare the figures and lodge the claim. Have last year’s profit and loss on hand. Call 03 7046 3766 or send an enquiry.
What Business Interruption Insurance Covers
Business interruption insurance covers lost income, fixed costs and the extra costs of trading on for businesses whose operations are disrupted by an insured event.
Property insurance pays to repair the damage. Business interruption insurance covers the revenue you lose and the extra costs you carry while the business recovers, which is why it sits in most business insurance packages.
The cover keeps wages, rent and loan repayments moving while trading is interrupted. Larger operations often hold the same cover inside an ISR insurance policy. It sits within our business insurance range at Fortis Risk Solutions. Hospitality venues feel this most, which is why cafe insurance packages are built around the indemnity period.
Business Interruption Insurance: Cover Sections and Benefits
What Business Interruption Insurance does not cover
Business interruption insurance follows the property policy behind it. If the damage is not covered there, the income loss is not covered here. The usual exclusions:
- Lost income where the underlying damage is excluded, or the property was never insured
- A downturn caused by the market, a lost contract or a customer moving elsewhere
- Delay you caused, such as slow decisions on repairs or late supply of information
- Extra time and cost that comes from rebuilding to a better standard than before
- Supplier and utility failures unless those extensions were arranged and the sites named
- System outages and ransomware, which need cyber cover rather than a property wording
- Losses continuing past the indemnity period, however long recovery actually takes
FRS tests the indemnity period against a realistic rebuild timeline, including planning approvals and machinery lead times, rather than accepting the default on the schedule.
How Business Interruption Insurance premiums are set
Business interruption insurance is rated on the money at risk and on how long you would take to trade normally again. Insurers work from the declared figure and the period you nominate. Factors:
- The insured gross profit or revenue declared for the coming year
- The indemnity period chosen, since a longer period costs more and fails less often
- The property risk underneath, including construction, fire protection and hazard exposure
- How replaceable the premises are, and the lead time on specialised machinery
- Reliance on a single supplier, a single customer or one location
- Additional increased cost of working and claims preparation costs added to the section
- Claims history, particularly any earlier interruption at the same site
Declared figures date quickly. FRS works from your current accounts and forecast so the sum insured reflects the year ahead rather than last year’s trading.
How to claim on Business Interruption Insurance
An interruption claim is proved with records, so the bookkeeping you start on day one decides what you recover. Both claims run together, since the property loss sets the timeline. The FRS process:
- Notify: Call FRS with the property claim, because business interruption insurance is measured from the same event
- Record the dates: Record the date trading stopped, and exactly which parts of the business stopped
- Keep a loss ledger: Open a separate ledger for the loss: lost sales, wages, hired premises, freight and overtime
- Do not delay repairs: Do not sit on repairs waiting for approval, tell us and we will get the adjuster moving
- Provide the accounts: Give us monthly accounts and prior year figures so the shortfall can be measured
- We lodge and manage: FRS lodges the claim, works with the forensic accountant and pushes for progress payments
Contacts and the form sit on our make a claim page.
Business Interruption Insurance compared with property cover
| Question | Business interruption | Property, material damage |
|---|---|---|
| What it covers | Lost gross profit, continuing wages and extra costs while you recover | Repair or replacement of buildings, stock, plant and contents |
| Who buys it | Businesses with fixed overheads that keep running after damage | Any business that owns or is responsible for physical assets |
| Typical trigger | Damage that stops or slows trading at the insured site | The physical damage itself, whether or not trading is affected |
| Sits with | The property section it depends on | Liability, cyber and motor policies |
The two are written together for a reason. Rebuilding a factory is the smaller problem, since the wages and rent keep running while nothing is produced. FRS sets the property sums insured and the interruption figures in one exercise, whether the property sits in a pack or an ISR policy.
Business Interruption Insurance - Client Case Studies
Cases from the Fortis Risk Solutions broking team. Client names have been removed.
Client case: Property Damage, Stock and Business Interruption After a Cyclone
The client situation: A restaurant located inside a shopping centre was forced to temporarily close after a cyclone in Queensland caused a prolonged power outage to the centre. The loss of electricity caused refrigerated and frozen food stock to spoil and prevented the restaurant from trading.
The incident happened just 6 weeks after the restaurant opened. We had provided holistic risk advice prior to the opening, and they had taken the necessary insurance to protect their operation.How the policy responded: Its Business Insurance policy included cover for Business Interruption arising from damage and loss of stock from storm damage affecting utility services, allowing the cyclone-related power outage and the resulting loss of income and gross profit to be recovered under the policy.
The restaurant claimed approximately $2,368 for spoiled stock and subsequently $1,384 a week of lost Gross Profit for 13 weeks until they fully recovered from the cyclone, a total indemnity of $23,989 including cleaning costs and other additional increased costs of working.How Fortis Risk Solutions helps: We advise on risk before a venue opens, not after the first loss. Utility failure and stock spoilage were on this policy because we raised them at the start.
Client case: Coffee Machine Breakdown
The client situation: A café’s commercial coffee machine suddenly broke down. While the café remained open and continued selling cakes, bread and other products, the loss of coffee sales resulted in a significant reduction in turnover.
How the policy responded: Machinery Breakdown cover helped with the insured repair costs, while associated Business Interruption cover helped with the resulting loss of income during the affected period, subject to the policy terms and conditions.
How Fortis Risk Solutions helps: Machinery breakdown is an optional section that many cafes leave off. We raise it for any shop whose takings depend on one machine.
Every policy is different and the outcome of a claim depends on its terms. As your broker, Fortis Risk Solutions compares insurers and policy wording before you buy, and lodges and manages the claim for you when something happens. Talk to us about your own cover.
Local pages: business interruption insurance in Geelong and Bendigo, written around the businesses and risks in each region.
Business Interruption Insurance FAQs
Yes. Property insurance pays to repair or replace what was damaged. It does not replace the income you lose while you cannot trade, or while you trade at reduced capacity. Business interruption insurance fills that gap and protects cash flow through the recovery period.
Base the sum insured on your gross profit or revenue, your fixed costs and how long a full recovery would realistically take after a major loss. The indemnity period matters as much as the figure. Many claims run out of cover because recovery takes longer than the owner expected. We calculate sums insured from your financial data rather than an estimate.
Increased turnover, new contracts, extra locations or a change of supplier can all move the figure you need. If insurers are not told, a claim may be reduced. We review cover with clients through the year, not only at renewal, so the sum insured tracks the business.
Most claims start with an insured event under the property policy: fire, storm, explosion or malicious damage. Extensions can pick up denial of access, supplier disruption or utility failure, depending on the wording. If you own the premises, the trigger usually sits in your commercial property owner insurance.
Most businesses underestimate recovery time, leave fixed costs out of the calculation or work from last year's figures. Underinsurance can cut a payout sharply, and it bites hardest on long interruptions. We set sums insured against current turnover, current cost structures and a realistic recovery timeline.
Business interruption cover is only as good as the numbers behind it. The indemnity period should be long enough to rebuild and win customers back, which is often longer than owners expect. The gross profit sum insured has to be worked out the insurer's way, which is not the net profit on your tax return. Extensions for supplier failure or blocked access are worth comparing too. We can work through the calculation with you before approaching insurers.
Related reading
Related pages
Related industry pages: Loss of Rent Insurance, Hotel and Hospitality Property Insurance, Hospitality and Tourism Insurance
Talk to a broker about Business Interruption Insurance
Call 03 7046 3766 on weekdays between 9:30am and 6pm, email admin@fortisrisksolutions.com.au, or send an enquiry and a broker from our Box Hill or Hawthorn office will come back to you about business interruption insurance. Tell us what the business does and what the lease or contract asks for, and we take it from there.