What to Ask Before You Buy Business Interruption Insurance

Business interruption insurance is an important way to protect your business from unexpected events that stop you from trading as normal. It helps cover the loss of income and extra running costs when your business is forced to shut temporarily or cannot operate fully.

But before you buy this type of cover, you need to ask a few key questions. These questions will help you find out exactly what the policy includes, how it works, and whether it’s suitable for your business.

This guide breaks down what you need to know, what to watch out for, and how to choose the right level of protection.

Questions to Help You Understand What’s Actually Covered

Business interruption insurance does not always cover everything. Each policy is different, and it’s important to find out exactly what’s included before you sign up. Here are some key areas to ask about:

Does the cover only apply to physical damage?

Some policies only begin when physical damage has occurred. For example, a fire or flood that damages your building might trigger the cover. But what if your supplier suffers a loss, or there’s a power failure nearby?

Ask if the policy covers losses caused by indirect problems too, such as issues with suppliers or transport, or access to your business being blocked. This is especially important if your business depends on other companies or locations to run smoothly.

What specific events are included in the policy?

Every policy lists certain events it will cover. These often include fire, flooding, storms, or vandalism. But not all policies include cyber-attacks, illness outbreaks, or government shutdowns.

It’s important to check if events like pandemics or national emergencies are included. If not, you may need to pay for extra cover or an add-on to protect your business in these cases.

How long does the policy support your business?

There is usually a time limit on how long payments will continue. This is called the indemnity period. It might be 3 months, 6 months, 12 months, or more.

Think about how long it would take your business to fully recover after a major problem. Would you be back on your feet in 6 months? Or would it take longer to rebuild, rehire staff, and regain customers?

How Your Policy Will Calculate and Limit Payouts

When it’s time to claim, insurers use certain rules to work out how much to pay. Understanding these methods helps you know what to expect and how to plan better.

Usually, the payout is based on the income your business would have earned if the event had not happened. The insurer may look at your financial records from the past 12 months to work this out. If your business has quiet and busy seasons, the result might not reflect your highest earning period.

Policies may also include a maximum payout limit. This is the highest amount the insurer will pay, no matter how big your loss is. If your actual losses are higher, you’ll have to cover the difference yourself.

Some policies have what’s called a “sum insured”. This is the value you choose to protect when buying the policy. If you set this value too low, you might not get the full support you need. It’s important to keep your income estimate accurate and up to date each year.

You should also check if the policy includes “increased cost of working”. This means extra money you spend to keep your business going after the disruption. These costs could include renting a new place, hiring extra staff, or paying for transport. Not all policies include this by default, so ask to be sure.

What’s Excluded or Easy to Miss in the Fine Print

Every insurance policy comes with exclusions. These are things the policy does not cover. It’s easy to overlook these details, but they can make a big difference if you need to make a claim.

For example, many policies don’t cover loss caused by disease outbreaks, unless you pay for special protection. The same is true for loss due to strikes, civil unrest, or cyber-attacks. If your business relies on digital tools or online systems, this could be a serious gap in cover.

Another common issue is delays. If repairs to your premises take longer than expected, but your cover period runs out, the insurer may stop payments—even if your business is not yet ready to reopen.

There may also be rules about when you can start claiming. Some policies only start paying after a few days, known as a “waiting period”. Others may require detailed proof of income, losses, or efforts you made to reduce damage. Missing documents could delay or reduce your claim.

Finally, be careful about shared spaces. If you run your business in a shared building or use shared utilities, damage elsewhere in the building might not be included, even if it affects your ability to operate.

How to Make Sure the Policy Fits Your Business

No two businesses are exactly the same, so your insurance should reflect what you do, how you operate, and what risks you face. The right policy depends on your business type, size, location, and more. Here’s how to make sure your cover is the right fit:

Understand what keeps your business running

Think about what your business needs to operate. Is it a physical shop, a team of staff, a supply chain, or access to certain equipment? Make a list of what’s most important and consider how you’d be affected if any of these were lost or delayed.

If your business depends on stock or suppliers, ask whether losses due to their problems are covered. If you rely on foot traffic or local events, think about whether external disruptions could affect you and if your policy would cover that.

Check if your income changes during the year

Seasonal businesses need to be careful. If your best months are summer or Christmas, make sure your policy can reflect this. An average income estimate may not be enough to cover losses during your busiest times.

You may need to provide records showing monthly trends, so the insurer can better understand your income pattern. Ask your broker or adviser how to provide this detail when setting up the policy.

Get expert help and review yearly

It’s always a good idea to speak to someone who understands business insurance. A qualified broker or adviser can help you pick a policy that matches your business size, income level, and industry type.

Once you’ve bought a policy, don’t forget to review it every year. As your business grows, your needs may change. You might hire more staff, open new locations, or offer new services. These changes need to be reflected in your insurance cover to avoid any shortfall during a claim.

Also, if you change premises, update your contact details, or switch suppliers, let your insurer know. Keeping your information accurate ensures a smoother claims process if anything goes wrong.

Taking time to ask these questions now can save you money and stress later. Business interruption insurance is not just a box to tick—it’s a vital safety net that can help your business survive hard times.