Business interruption insurance: your turnover when everything stops

The trigger: physical damage, not simply a fall in turnover

This is the most misunderstood point, and the source of most nasty surprises. Business interruption does not trigger by itself because your activity slows down. There must be covered physical damage under your fire or property policy, and it must be what causes the interruption. With no covered physical damage, there is no payout.

This point fed countless disputes during the COVID-19 crisis: many self-employed people believed they were covered, but with no physical damage, a standard business interruption policy did not respond. More on this below.

• × Losses with no physical damage: a falling market, lost customers, an economic downturn, administrative closure or a pandemic without destruction of your property (unless a specific extension applies).
• × The damage to the property itself: building, equipment, stock. That is repaired by the fire or property policy, not by business interruption.
• × The part of the loss caused by too short an indemnity period or by underinsurance.
• × Intentional wrongdoing, fraud and obvious lack of maintenance.
• × The self-employed person's own incapacity for work: that belongs to guaranteed income, not to business interruption.
• × Purely financial losses (fines, contractual penalties) unconnected to covered physical damage.

• The sum insured
  C'est : The gross margin (indemnity basis) or the daily amount (agreed sum) you declare.
  The trap: Underinsurance: an amount set too low brings in average, and the insurer cuts the payout in the same proportion.
• The indemnity period
  C'est : The maximum time (12, 18, 24, 36 months) during which the insurer makes good the loss after the event.
  The trap: The default 12 months: rebuilding AND winning back customers often takes longer. The cover stops while turnover has not returned.
• The waiting period and the deductible
  C'est : The delay (often in days) before payment starts, or the share you bear yourself.
  The trap: A long waiting period that was never understood: the first days of closure, sometimes the most critical for cash, are not covered.

The indemnity period deserves particular attention. After a serious fire you have to clear the site, obtain permits, rebuild, re-equip, then win back customers who have found other habits. Twelve months go by fast. For many activities, 18 to 24 months is a reasonable floor, and more for trades with heavy rebuilding or a loyal clientele that takes time to rebuild.

Business interruption or guaranteed income: do not confuse them

Both protect "income", hence the confusion, but they cover an entirely different risk, and a different person.

• The business

  Business interruption

  Makes good the earnings the company misses out on when physical damage (fire, water damage) stops the activity. The trigger is damage to property. It lives with the fire policy or the commercial multi-risk policy.

• The person

  Guaranteed income

  Pays an annuity to the self-employed person in the event of incapacity for work through illness or accident. The trigger is you being at a standstill, not your walls. It is a personal insurance, on top of the state scheme.

Both answer the same worry, "what if I can no longer earn?", but for opposite causes. Most self-employed people need both. See our dedicated page on guaranteed income.

• Nature of the activity
  Factor number one: a practice with little risk of a long closure is not priced like a workshop or heavy-rebuild industry.
• Gross margin or daily amount insured
  The basis of calculation: the higher the amount to insure, the higher the premium.
• Indemnity period
  Going from 12 to 24 or 36 months raises the cost appreciably, but also the real security.
• Waiting period & deductible
  A longer waiting period or a higher deductible lowers the premium, in exchange for bearing more yourself.
• Extensions
  Supplier or customer failure, extended additional expenses, administrative closure: every option weighs on the price.
• Prevention & claims history
  Fire detection, sprinklers, premises security and claims history all affect the premium.

• What triggers business interruption insurance?

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  Physical damage covered by your fire or property policy: fire, water damage, storm, breakage, or a natural disaster (folded into the Belgian fire regime). It is that physical loss which interrupts or reduces your activity, and it is what opens the right to compensation. Key point: a simple fall in turnover, a market crisis or a pandemic without physical damage does not trigger the cover. With no covered physical damage, there is no payable business interruption claim.

• Agreed-sum or indemnity business interruption: which to choose?

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  The indemnity basis reconstructs the real loss of gross margin: the turnover you would have achieved without the loss is recalculated and your margin rate applied. It hugs the figures closely, but calls for solid accounts and a good estimate of the margin to insure. The agreed-sum basis pays a fixed daily amount for each day of total interruption (pro rata if the stoppage is partial): simple, quick to settle, it appeals to the self-employed and the professions whose margin is hard to establish. The right choice depends on your cost structure and your trade, exactly the call a broker frames with you.

• Does business interruption cover a pandemic such as COVID?

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  As a general rule, no. Standard cover is triggered by covered physical damage (fire, water damage). An administrative closure linked to a pandemic, with no physical destruction of your property, falls outside that frame: this is what fed many disputes during the COVID-19 crisis. Some insurers offer specific extensions (administrative closure, epidemic, business interruption without physical damage), but they are limited, capped and to be checked case by case in the general conditions.

• Which indemnity period should you choose?

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  The indemnity period is the maximum time, from the date of the loss, during which the insurer makes good your loss: often 12, 18, 24 or 36 months. It has to cover the real time needed to restart (clearing, permits, rebuilding, refitting) AND the winning back of customers who went elsewhere. The classic trap is 12 months: after a serious fire, rebuilding and regaining your level of activity often takes longer. A period that is slightly long beats a policy that stops while turnover has not returned.

• Are business interruption and guaranteed income the same thing?

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  No, they are two different worlds. Business interruption protects the company: it makes good the loss of income when physical damage stops the activity. Guaranteed income protects the person: it pays an annuity if you, the self-employed person, are unfit for work because of illness or an accident. One deals with a building at a standstill, the other replaces your income when you are the one at a standstill. Many self-employed people need both, for different risks.

• Is business interruption compulsory in Belgium?

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  No, no law imposes it. It is an optional cover, most often taken out alongside the fire policy or within a commercial multi-risk policy. That does not make it any less decisive: paying for the walls after a fire is pointless if the company goes under for lack of cash during the months of closure. A landlord or a lender may also recommend it, or even require it, under a commercial lease or a loan.

Let us put a figure on what "holding on at a standstill" means for you

Day to day, Nathalie runs the claims files of the self-employed and SMEs at Cinassur. She has followed enough post-fire recoveries to know that real protection is not decided by the premium, but by the duration and the amount genuinely insured. At Cinassur we do not sell a product: we audit your real risk and negotiate the cover that matches it. How we work →

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