Day to day is chugging along smoothly for your small business. Customers are coming in, you’re making a profit, then suddenly, things change. A fire breaks out in the kitchen, a severe storm damages your stock, or a burst water pipe at the premises means you need to temporarily shut down for an uncertain period of time.
Even temporary disruptions like these can create serious pressures for small businesses when income suddenly stops but expenses don’t.
Climate change – such as bushfires and floods in short succession – is also increasingly impacting Australian small businesses and can be highly disruptive, adding extra cash flow strain in the form of damage-related closures or supply chain disruptions.1
While such events may all seem rather ominous, a way to be more prepared is by assessing your business’s risks and considering a business interruption insurance policy. But what are the risks to your business? What does business interruption insurance cover? Do you need it? And when might you make a claim?
In this guide, we answer these questions and more to help you feel more prepared to handle the risks many small businesses face, and to better understand business interruption insurance – whether you’re just starting a small business or scaling up your venture.
“For small businesses, managing risk is essential to long-term sustainability and financial stability,” says Andrew McKellar, Chief Executive Officer of the Australian Chamber of Commerce and Industry (ACCI), in the ACCI Addressing the Small Business Insurance Challenge report.
What is business interruption insurance in Australia?
In general, Business Interruption is designed to cover a loss of profit if a business is disrupted or cannot operate due to certain insured events.2
What does business interruption insurance cover?
What is specifically covered by business interruption insurance, also sometimes known as business continuity insurance, may vary from insurer to insurer. At Youi, we cover your loss in gross profit, increased costs of working, and claim related professional fees and charges.10
Typically, business interruption insurance responds to ongoing expenses – sometimes also referred to as overhead costs or operational costs3 – which may include:4
- Administrative costs – Rent for your business space, utilities such as the internet or electricity, and salaries for administrative staff
- Sales and marketing costs – Advertising, website hosting and salaries for a sales team, for example
- General business costs – Accounting and legal fees, small business insurance and bank charges.4
Fixed overhead costs, unlike variable costs, remain the same regardless of production levels or operations such as rent, insurance premiums and full-time employment salaries.4 These are the costs that could pose a risk to your business if you were to have a temporary shutdown due to an incident.
While ongoing expenses may pose a high risk to your business if it were to close temporarily, there are some other factors and costs to consider that could also affect your business:5
- Supply chain disruption – for example, an incident affecting the roads or rail, or a supplier’s premises could mean they are unable to continue to supply your business with necessary stock.
- Costs of recovery – temporary hire or leasing costs that may enable your business to keep operating until the business premises are repaired and can be used again.5
Do I need business interruption insurance?
Whether or not you need business interruption insurance is up to you, your individual needs and your business type. If you’re on the fence about this type of cover, there are some things to consider which may help you decide.
Some questions to ask yourself if you were to close due to a natural disaster – as an example of a business interruption – may be:6
- How long can you operate on reduced or no income?
- How long can you meet financial obligations such as staff wages, payments to creditors or suppliers?
- If you employ staff, would you need to ask them to take unpaid or paid leave, or terminate their employment altogether?6
Once you have a rough idea of where you would stand in the above circumstances, it may be worthwhile assessing your business risk and developing a management plan.
“Ensuring the right insurance coverage is in place can mean the difference between surviving an unexpected event or facing significant financial hardship,” says McKellar.
“As well as considering and obtaining the necessary insurances, businesses should also ensure they have appropriate risk management measures in place.”
Another consideration is to document and regularly update a plan that lists key threats and outlines strategies to reduce risk. Outlining risk management could improve your attractiveness to insurers in some cases.7
Implementing a business continuity plan could also help with risk management. By mapping critical functions, assigning roles and defining contingency arrangements you can better prepare for disruptions.7
How much business interruption cover do I need?
How much business interruption cover you may need will depend on a number of factors including your day-to-day business activities.8
“At Youi, Business Interruption insurance is an optional extra cover available as part of our Small Business Insurance,”9 says Mervyn Hartley, Youi’s Head of Product – Home and Small Business.
“Selecting the right insured value for your business interruption cover is an important step. Understanding how much cover you may need to support your business will come down to a few things.”
“When you’re calculating your insured value, you should consider what would be the financial impact of your business being interrupted or even forced to close temporarily should the worst happen. For example, how would this affect your profit, will there be increased costs to continue operating in the short-term, would you need to pay for some professional services, and how long could it take to get back up and running as normal again?” says Hartley.
When might I make a business interruption claim?
There are a number of different events that could cause a temporary disruption to your business. A business may be interrupted due to:5
- Loss or damage to business equipment or the premises – for example, due to events such as theft, escaping water, storm, flood or fire.
- Prevention of access – This can be due to loss or damage to a building or other property in the immediate vicinity which hinders access to your business.
- Damage to property of a supplier – While it may not be direct damage to your business, if your key supplier can’t get goods or services to you, it may halt your business operations temporarily.
- Damage to transportation routes – For example, if roads, bridges or railways within Australia are impacted by an incident which prevents the transport of your stock, you may be covered.5
So, when would you make a business interruption claim at Youi? If you have Business Interruption as an optional cover on your Small Business Insurance policy, you might submit a claim if your business is interrupted or interfered with as a result of these kinds of incidents.10
Is business interruption insurance the same as small business insurance?
More broadly speaking, it depends. Some insurers may offer business interruption insurance as a standalone business insurance product, while others – such as Youi – offer it as an optional cover to be added to an eligible policy.
At Youi, our Small Business Insurance automatically covers Public and Products Liability with a number of optional covers to choose from such as Professional Indemnity, Business Items, Business Property Damage and Business Interruption cover.
Some people may also mistake business interruption cover as income protection. Income protection is designed to pay part of your lost income if you become ill or injured and can’t work.11 Business interruption insurance would be the cover that the owner of a small business would take out to cover costs to the business if its operations are temporarily disrupted.2
How much does business interruption insurance cost?
As with any type of business insurance, the cost will vary depending on a number of factors. Some of those may include:
- The size of the business and number of employees6
- The type of industry the business operates in6
- Any prior claims made6
- Day-to-day business activities12
- Financial details such as annual turnover.12
Does Youi offer business interruption insurance?
Youi offers Business Interruption as an optional cover you can ask to add when you take out a Small Business Insurance policy.
“Business interruption as an optional cover may be suitable for your business to help prepare for unforeseen incidents that could arise and impact the trading of your business,” says Hartley.
If you’re exploring Small Business Insurance options and considering Business Interruption cover – or you’re reviewing your small business insurance – consider starting a quote with Youi or speaking to one of our specialist advisors by calling us on 1300 010 648.
1Source: NSW Government – Climate change effects on business, March 2026
2Source: Insurance Council of Australia – What do I need to provide to make a Business Interruption claim?, April 2024
3Source: Monash University – Monash business school marketing dictionary, n.d.
4Source: Xero – Overhead costs: How they work and how your small business can manage them, November 2025
5Source: Insurance Council of Australia – Small business insurance – Industrial special risks insurance and business interruption insurance, February 2026
6Source: Government of WA – Disaster recovery tips for small business, September 2025
7Source: Australian Chamber of Commerce and Industry – Addressing the Small Business Insurance Challenge, October 2025
8Source: QLD Government – Business Insurance, September 2024
9An additional cost applies for optional covers. Conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
10Business Interruption is an optional cover. Additional costs, conditions, limits and exclusions apply. For full details, see the PDS & Policy Wording.
11Source: Moneysmart – Income protection insurance, n.d.
12Source: Government of WA – Practical guide to business insurance, n.d.
