Business Interruption Insurance: What Is It and Do You Need It?
If you had to close for 3 months, could your business survive? This is what BI cover is for.
Business Interruption (BI) insurance replaces lost income and covers ongoing expenses when an insured event forces you to close or reduce operations. The COVID-19 pandemic brought unprecedented attention — and controversy — to BI cover.
What it covers (when it responds)
- •Lost revenue: The difference between what you would have earned and what you actually earned during the interruption period
- •Fixed costs: Rent, loan repayments, payroll for key staff — expenses that continue even when revenue stops
- •Extra expenses: Temporary premises, equipment hire, overtime to catch up after reopening
- •Key person cover: Some policies cover income loss if a key person (owner, key employee) is incapacitated
Triggers and exclusions
BI cover only responds if the interruption is caused by an insured event in your property policy — fire, storm, flood, etc. It does NOT respond to: pandemics (post-COVID exclusion is now near-universal), economic downturns, supply chain issues, or loss of a major client.
Post-COVID reality
The Australian courts ruled in 2022 that pandemic BI claims were valid under some older policies, resulting in mass payouts. Since then, virtually all BI policies explicitly exclude pandemic and infectious disease events. Read the PDS carefully.
Getting the sum insured right
The most common BI mistake is underestimating the indemnity period. If a fire destroys your premises, rebuilding takes 12–18 months — your indemnity period should cover that, not just 3 months. And the gross profit figure needs to reflect actual revenue, not a conservative estimate.
Ready to compare?
Compare business insurance →