Loss of Profit (Business Interruption) Cover for Your Business

Imagine a fire at your business. Your policy pays for the damage to the building, machinery and stock. But repairs take weeks, perhaps months. During that time your doors are closed, there are no sales and customers go elsewhere, while rent, salaries, loan repayments and other fixed costs keep coming. Loss of profit cover, also known as business interruption cover, exists to fill exactly this gap.

What loss of profit cover does

Standard business insurance protects physical assets: the building, fixtures, machinery and stock. Loss of profit cover targets the lost income and continuing costs that follow physical damage. In other words, it helps the business stay as close as possible to where it would have been without the loss. The logic is simple: the business must stop or reduce activity because of damage, turnover falls, but fixed costs continue. The cover aims to bridge that gap on the basis defined in the policy.

When it applies

Loss of profit cover usually does not stand alone. It is linked to a property damage cover in your business policy. First, an insured event, such as fire, explosion or flood, must cause physical damage at the premises. Falls in income without physical damage, such as an economic slowdown, losing customers or supply problems, are not the subject of this cover. The events that trigger it are defined in the policy, so read the main policy and the loss of profit section together.

What can be included

• Gross profit lost: the profit the business could not earn because of the damage.
• Continuing fixed costs: rent, salaries, insurance premiums and subscriptions that continue even when activity stops.
• Increased cost of working: depending on the policy, reasonable costs to keep trading and reduce the loss, such as renting temporary premises or paying overtime.

How these items are defined, calculated and capped varies between policies. Clarify with your agent how each item would work for your business.

Why the indemnity period is critical

Loss of profit policies set a maximum period, starting from the date of damage, during which losses are covered. You choose it when the policy is issued, subject to the insurer’s acceptance. Consider these questions:

1. Can your machinery or specialist equipment be replaced quickly, or does ordering and installation take a long time, especially if it is imported?
2. If the premises were destroyed, how long could permits and fit-out take?
3. Will customers return as soon as you reopen, or will it take time to reach previous levels?

Choosing an unrealistically short period can leave income losses after the repairs uncovered.

An example

Picture a small restaurant in an office complex in Maslak. A night-time kitchen fire badly damages the extractor hood and counters. The fire cover pays for repairs, but new equipment takes time to arrive and the restaurant stays closed. Rent and salaries continue, and some regular customers move to other restaurants. Without loss of profit cover, the owner must survive on savings or borrowing. With it, lost profit and continuing costs during closure are assessed under the policy terms. If customers take time to return after reopening, whether the indemnity period covers that phase becomes decisive.

Who needs it most, and how to prepare

• Restaurants, cafés and shops with high rent and staff costs
• Workshops that depend on specialist machinery
• Businesses operating from a single location with no alternative premises
• Competitive sectors where customer loyalty is easily lost

To structure the cover correctly, prepare your financial data: recent income statements, fixed cost items and staff numbers. Setting the sum insured too low can lead to underinsurance, just as with property covers. Working with your accountant helps. After a loss, the same records matter, because the claim compares performance before and after the event; keep a copy of your accounts off-site in a secure digital location. For an overview of business package policies, see our guide to commercial package insurance.

To assess loss of profit cover and compare quotes from several insurers, visit our Maslak business insurance page. Call Ailenizin Sigortacısı on +90 530 375 89 61 or send a WhatsApp message for English-speaking support.