The indemnity period is the maximum length of time for which a business interruption claim can respond after insured damage, subject to the policy. Choosing it by habit—often twelve months—can leave a serious shortfall.
Recovery takes longer than physical repair
A building may need investigation, demolition, planning approval, design, tendering and reconstruction. Specialist machinery can have long manufacture, delivery and commissioning periods. Utilities, licences and inspections may delay reopening further.
Reopening is not the same as recovery
Customers may have moved to competitors, staff may have left and production may need to ramp up gradually. The financial loss can continue after the doors reopen, particularly where contracts or reputation take time to rebuild.
Model dependencies
Consider sole suppliers, neighbouring access, shared utilities, data systems, landlords and outsourced processes. Damage away from the main premises may still interrupt trading if the policy includes an appropriate extension.
Use a severe but plausible scenario
Estimate the timeline for a major fire or other insured event at the most important location. Add contingency for disputes, weather, procurement and the recovery of sales. The period should reflect the slowest critical path, not the fastest optimistic estimate.
Review the financial basis too
A suitable period cannot correct an inadequate sum insured or wrong definition of gross profit. Work with the accountant and insurance adviser so turnover, variable costs, trends and additional expenditure are treated consistently.
The result may be 24, 36 months or longer for some operations. The appropriate choice depends on the business and policy wording.