Your building gets rebuilt. The question is whether the policy is still paying by then.
Business interruption does not pay until you are back to normal. It pays for a set number of months that you chose, often years ago, usually without much thought. That number is the whole policy. If the rebuild runs past it, the cheques stop while the doors are still shut.
Start a quote file Read the short answer firstIt starts at the loss, not at the rebuild.
Twelve months is a habit, not a calculation.
Sales do not return the day you reopen.
How long does business interruption insurance actually pay for?
It pays for the indemnity period written on your policy, and not one day longer. That period is a fixed number of months, most often twelve, and the clock starts on the day of the loss rather than on the day the builders arrive. If your business is still not trading normally when those months run out, the policy stops paying and the rest of the loss is yours.
This is the part most owners get wrong, and it is an easy thing to get wrong, because the number looks harmless on a declarations page. The limit tells you how much money is available. The indemnity period tells you for how long. Running out of time is just as expensive as running out of limit, and it happens far more often.
Count the steps honestly. The fire is put out. The adjuster is appointed and the scope of loss is agreed. Debris is cleared. Drawings are done and a permit is applied for. The job is tendered and a contractor is booked. Long-lead equipment is ordered, and specialised machinery is rarely on a shelf. Then it is built, inspected and commissioned. In the Lower Mainland the two steps that stretch the most are permitting and contractor availability, and neither is in your control. Twelve months covers a small fit-out. It does not reliably cover a plant, a kitchen or a warehouse.
Time, money, the tail, and everyone else’s building.
The indemnity period
The months your policy will keep paying. It should be set from how long a full rebuild of your specific premises would take at its slowest, not from how long you hope it would take. If you hold equipment that is made to order or imported, that lead time is part of the answer.
The sum insured
Business interruption is usually written on gross profit, and gross profit in a policy is not the same figure your accountant puts on the statement. It is revenue less the costs that genuinely stop when you stop. Wages and rent often do not stop. Declare too little and a co-insurance or average clause can cut the payment in proportion, so an honest claim is settled at a fraction.
The extended period
Reopening is not recovering. Customers who went elsewhere do not all come back on day one. Extended business income cover keeps paying for a stated time after you are trading again, while sales climb back. It is inexpensive and it is the single most commonly missing piece.
Dependent property
Your building can be untouched and your income can still stop, because the supplier who makes your one component burned down, or the anchor tenant that brings your foot traffic closed. Contingent or dependent property cover answers that. It has to be asked for, and the properties usually have to be named.
Three ways a well-insured business still ends up short.
The machine that was not on a shelf
Property pays to replace the line. Nobody argues about that. But the machine is built to order overseas and arrives months after the building is ready. The indemnity period expired while the plant sat finished and empty. The property claim was paid in full and the income claim stopped early, which is the worst of both.
The gross profit that was a guess
The figure was set when the business was smaller and was never revisited, because nothing draws attention to it at renewal. Turnover has grown since. The average clause applies, and the settlement is reduced by the same proportion the declaration was short. This is not an insurer being difficult. It is the clause doing exactly what it says.
The reopening that nobody attended
The doors open on schedule and the policy period ends the same week. Regular customers found another supplier eleven months ago and are on a contract now. Trading takes most of a year to come back, and none of that year is insured, because extended business income was never added.
The ones that come up at renewal.
Can I just buy a longer indemnity period?
Yes, and it is usually the cheapest improvement available on a commercial policy. Eighteen and twenty-four months are common on manufacturing and on any premises with specialised equipment or a difficult permitting path. The extra cost is small next to the extra months, because the early months of a claim are the expensive ones to insure and the later months are the cheap ones.
Does it pay while the building is being repaired even if I am partly open?
Generally yes. Business interruption responds to the reduction in income, not only to a total shutdown. Trading at half capacity from a corner of the site is a partial loss and is treated as one. Keep records that show what normal looked like before, because the claim is measured against that.
What if the power goes out and my building is fine?
A standard policy responds to interruption caused by insured damage to your own property. An outage at the utility is damage to someone else’s property, so it needs service interruption cover, and that is a separate item on the policy. Spoilage of stock during an outage is different again and usually sits with equipment breakdown.
Does it cover downtime from a cyber attack?
Not on a property policy. Business interruption here is triggered by physical damage. A ransomware event that stops your systems without touching the building is answered by the business interruption section of a cyber policy, which is written differently, has its own waiting period, and has its own limit.
How do I work out my own figure without guessing?
Bring last year’s financial statements and your current declarations page to one appointment. The gross profit definition is worked out from the statements line by line, then the period is set from how long your premises would really take to rebuild and re-equip. It is an hour of work and it is the only way to know whether the number on your policy means anything.
Not the question you had? Send the declarations page and the question with it through the quote file and you will get a written answer, not a sales call.
Find out what your indemnity period is before you need it.
It takes one look at your declarations page. If the number is wrong, it is fixable at renewal, and often before.