When an insured event damages a self storage facility, property insurance may pay to repair the buildings and replace equipment. But repairs take time. While all or part of the site is closed, the costs of running it keep coming.
Business interruption insurance is designed for that gap: the income a business loses, and the extra costs it carries, after an insured event disrupts trading. This guide explains how the cover generally works, what it may include, and what storage facility owners should check. Cover always depends on the insurer and the policy wording.
What is business interruption insurance?
Business interruption insurance can help replace income your business loses, and meet some of its costs, while trading is disrupted by an insured event. Property insurance deals with the physical damage. Business interruption deals with the financial effect of that damage on the business.
In many policies, business interruption cover applies only when the interruption is caused by damage that is insured under your property cover. That is one reason the two are often arranged together. Check how your own policy is worded.
Depending on the insurer and the policy, cover may include:
- loss of gross profit or revenue while trading is reduced
- ongoing costs such as rent, wages and utilities
- extra costs of keeping the business going, such as temporary arrangements for customers
- other costs set out in the policy
Why it matters for a storage facility
Even when your facility isn't generating income, expenses don't stop.
A storage facility earns its income from units being rented. If damage means part of the site cannot be used, or customers cannot reach their units, rental income can fall while costs such as wages, rates, utilities, security and loan repayments continue.
Recovery can also take longer than the repairs. Some customers may move their goods elsewhere, and it can take time to fill units again after you reopen. It is worth thinking about that tail when you consider how long cover should last.
What could interrupt a storage facility?
Every site is different, but interruptions can come from events such as:
- fire or storm damage to buildings, roofing or roller doors that closes part of the site
- damage to gates, access or security systems that stops customers reaching their units
- flood or bushfire that damages the premises or blocks access to it
Each of these could reduce income for weeks or months. Whether a particular event is covered, and for how long, depends on the insurer and the policy wording. Flood cover in particular varies between insurers and locations, so ask about it directly.
Some interruptions, such as equipment breakdown or a cyber incident, may need separate cover or an extension. If they matter to your business, raise them when you discuss your cover.
Property insurance and business interruption insurance
Scroll sideways to compare.
| Property insurance | Business interruption insurance | |
|---|---|---|
| What it's for | Physical loss or damage to buildings, contents and equipment | Loss of income and extra costs while trading is disrupted |
| What it may pay | The cost to repair or replace, under the policy terms | Lost income and certain costs, over an agreed period |
| When it responds | When insured property is damaged | Usually when insured damage interrupts trading |
Property insurance helps repair the site. Business interruption cover can help the business carry on while that happens, which is why many facility owners consider both.
What to check in a business interruption policy
- The indemnity period. This is the longest period the policy will pay for after an insured event. Think realistically about how long rebuilding, approvals and re-letting units could take.
- The sum insured. It is often based on gross profit or revenue. Use up-to-date financial figures so the amount keeps pace with your business.
- What triggers cover. Check whether the damage must be at your own premises, and whether the policy extends to things like loss of access, or damage to a utility or supplier you rely on.
- Waiting periods and excesses. Some policies apply a time excess before payments start.
- Exclusions. Some policies exclude or limit events such as flood, pandemics or government-ordered closures. Read the wording.
If something happens
Tell your insurer as soon as you can and follow the steps in your policy. Keep records of lost income and extra costs from the start. Good financial records kept before an event also make a claim easier to prepare.
Where to start
Read more about business interruption insurance for storage facilities, or see how it fits alongside property and contents cover on our facility business insurance page.
