The fire is not what closes a business. The eight months afterwards is.
Property insurance rebuilds the building. It does not pay the rent, the wages, the loan payments or the income you lose while you cannot trade. This is the cover worth getting right, and the one we most often see blamed afterwards.
Build the property file How it is calculated Have my cover checkedIncome lost and costs that continue while you cannot trade
Any business that stops earning when its premises are unusable
Your policy schedule and recent financial statements
What is business interruption insurance?
It replaces the income your business loses after an insured event stops you trading, and pays the costs that continue anyway, rent, salaries, loan payments and the extra expense of working from somewhere else. It only responds when there has been physical damage covered by your property policy. The amount and the length of time it pays for are both chosen by you, which is exactly why it goes wrong so often.
If the indemnity period runs out while you are still rebuilding, the payments stop. The rent, the wages and the loan repayments do not, and that gap is usually what closes a business rather than the fire itself. The Insurance Bureau of Canada’s description is short: “This coverage can compensate for loss of income while your business is shut down following an insured loss.” The two words that matter are insured loss. If the cause is not covered, neither is the shutdown. Read IBC on how to buy business insurance (opens in a new tab).
Get these wrong and the rest does not matter.
The sum insured
Usually based on gross profit rather than turnover, sales less the costs that stop when you do. Insuring turnover overpays. Insuring net profit badly underpays.
The indemnity period
How many months it keeps paying. Twelve is the common default and it is frequently too short: demolition, permits, rebuilding, re-equipping and winning customers back all take longer than people assume.
Extra expense
The cost of trading from a temporary site, renting equipment or paying overtime to catch up. Often the difference between surviving and not.
Payroll
Whether you keep paying staff while closed, and for how long. Losing your trained people is how a recoverable loss becomes permanent.
Contingent business interruption
When it is your supplier or your biggest customer who burns down, not you. Not automatic, and increasingly relevant.
Denial of access
Damage next door, or an emergency closure of your block, that stops customers reaching you even though your premises are untouched.
How long would it really take?
Work through this honestly and you will usually find your indemnity period is short. These are the stages people forget when they pick twelve months.
Before rebuilding starts
Investigation, adjusting, demolition, drawings and permits. Months before a single wall goes up.
The slowest machine
Specialist equipment on a long lead time decides your schedule, not the building work.
Getting customers back
Trade does not resume at full volume on reopening day. That ramp is part of the loss too.
This is where cheap policies hide.
Two quotes can look identical and behave completely differently.
The quickest way to make a commercial quote cheaper is to shorten the indemnity period or shave the sum insured. Nothing on the summary page looks wrong. The difference only appears in the year after a fire, when the payments stop while you are still rebuilding.
So when we quote, we will show you the indemnity period and the basis of the sum insured before the premium. If a competitor’s price is lower, ask them for those two numbers and compare those instead.
How this can play out.
A fire closes a bakery in March. The rebuild finishes in November. Property paid for the ovens; business interruption paid the eight months of rent, wages and lost margin. Only one of those two is optional, and it is the one people drop.
What decides a business interruption claim.
Interruption cover is a promise about time and money. The conditions below decide how much of each actually arrives.
The indemnity period that runs out early
Cover pays for a set recovery window. Rebuilding, permits and restocking routinely outlast a short one, and the costs that land after the window closes are yours.
A sum insured built on old numbers
The payout leans on the financials you declared. A business that grew since renewal is insured for the smaller version of itself on its worst day.
The waiting period nobody priced
Most wordings start paying after a set number of hours or days. Knowing yours before the closure is the difference between a plan and a surprise.
Suppliers and neighbours off the policy
A shutdown that starts next door or at a key supplier only pays if the policy was extended to say so. The standard form usually was not.
Ten minutes a year updating the numbers keeps this policy honest. Check that the declared figures still describe the business you actually run.
What business owners ask us.
How much business interruption cover do I need?
Base the amount on gross profit rather than turnover, and the length on how long it would genuinely take to be trading normally, including permits, rebuilding, equipment lead times and winning customers back. That length is the indemnity period and it drives everything.
Does business interruption cover a pandemic or a government closure?
Generally no. Standard cover responds to physical damage at your premises. Closures without physical damage are usually excluded, and that wording became much clearer across the market after 2020.
What if my supplier burns down and I cannot operate?
That needs contingent business interruption, which is a separate extension. It is not included by default and it matters most to businesses with one dominant supplier or customer.
Is twelve months long enough?
Often not. For anything involving specialist equipment, a custom building or a licensed premises, eighteen or twenty-four months is frequently more realistic.
What is extra expense cover?
It pays the additional costs of keeping going, a temporary location, rented equipment, overtime. Some businesses need more of this than income replacement, because staying open is what protects the customer base.
Do I still pay staff while closed?
You decide, and the policy should reflect the decision. Insuring payroll for a period is usually cheaper than recruiting and retraining an entire team afterwards.
The questions behind the questions.
How long could you survive not trading?
If you do not know, that is the number to work out. Send us your policy and your figures.