Business interruption insurance: claims and cost (Australia)

A fire tears through your cafe on a Friday night. Property insurance pays to rebuild the fit-out and replace the equipment — that part most owners have covered. But the rebuild takes seven months. In that time the rent is still due, your best staff need wages or they will take other jobs, and your customers are forming habits at the cafe up the road. That gap — the money the business does not earn while it cannot trade — is what business interruption insurance covers. It is the cover small businesses most often skip, and the one that most often decides whether they reopen.

What it actually pays for

• Lost gross profit. The profit the business would have earned during the downtime, calculated from your trading history.
• Ongoing fixed costs. Rent, loan repayments, insurance premiums, utilities, and payroll for the staff you need to keep.
• Increased costs of working. The extra expenses of keeping some trade going — temporary premises, hired equipment, overtime, extra advertising to bring customers back.
• Claims preparation costs (in many policies) — the accountant's fees for preparing the numbers the insurer will ask for.

The trigger matters: business interruption cover responds to an insured damage event under the linked property policy — fire, storm, water damage, impact. If the underlying property claim is excluded, the interruption claim usually fails with it. Pandemics are broadly excluded, and things like power outages or supplier failures are only covered where a specific extension says so.

The two numbers that decide everything

1. The indemnity period

The indemnity period is how long the policy will pay, counted from the day of the event — commonly 6, 12, 18 or 24 months. The classic mistake is choosing 6 or 12 months because it is cheaper, then discovering that a real recovery takes longer: insurance assessment, council approvals, demolition, rebuilding, refitting, restocking, and then the slow climb back to previous turnover. If the money stops at month twelve of an eighteen-month recovery, the last six months come out of your pocket.

2. The declared gross profit

Policies pay based on the gross profit figure you declare — and insurance "gross profit" is not the same as your accountant's definition. Declare too low and underinsurance clauses can scale down the whole claim. It is worth recalculating at every renewal, because a business that has grown 30% since the figure was set is 30% underinsured.

Claims live or die on records

A business interruption claim is an accounting exercise: the insurer reconstructs what the business would have earned, from your actual records. That means financial statements, BAS returns, and the policy schedule showing what was declared. Here is the uncomfortable part — the fire or flood that triggers the claim is also very good at destroying the filing cabinet and the laptop where those records lived. If you have not claimed before, start with how to make an insurance claim and how long a claim typically takes.

1. Keep every policy document off-site and digital. In Insuro, file the business pack — property, contents and business interruption sections — against your business entity, so the schedules survive whatever the premises does not.
2. Forward renewal documents as they arrive to your private @insuro.com.au address, so the current schedule with the declared gross profit and indemnity period is always on file, not buried in an inbox.
3. Use the renewal reminder as a review trigger. When the reminder fires, check the two numbers against this year's reality before paying — that ten-minute check is the whole game.
4. Know what you hold before you need it. When something goes wrong at 11pm, being able to open the policy and see the indemnity period, excess and insurer's claims line from your phone beats digging through a wet filing cabinet.

Who should seriously consider it

• Businesses tied to a physical location — cafes, retail, clinics, workshops, gyms — where damage means no trading at all
• Businesses with heavy fixed costs: leases, equipment finance, staff who cannot be stood down without losing them
• Businesses whose customers can easily go elsewhere and form new habits during a closure

A purely mobile or online business with low fixed costs may reasonably skip it. Everyone else should at least price it: the premium is typically a fraction of the property premium, for cover that addresses the bigger financial risk. Rebuilding a shop is a cost; seven months without revenue is a catastrophe.