Indemnity Period

The indemnity period is the maximum length of time your insurer will pay business interruption benefits after an insured event. It typically ranges from 12 to 24 months.

In other words, it’s the window during which your insurer helps cover your lost revenue and ongoing expenses while your business recovers from an insured event like a fire, flood, or storm.

Why It Matters

• If your business takes longer to recover than the indemnity period allows, the insurer stops paying and you’re on your own for the rest.
• Choosing too short a period is one of the most common mistakes in business insurance.
• The right indemnity period depends on how long it would realistically take to rebuild, refit, restock, and get back to normal trading.
• It’s not just about the physical rebuild. It includes the time it takes to win back customers and return to pre-loss revenue levels.

How to Choose the Right Period

Think about these factors:

• How long would it take to rebuild or repair your commercial property after a major event?
• How long to replace specialised equipment or stock?
• Are there council approvals, heritage overlays, or planning delays that could slow things down?
• How long until your revenue returns to where it was before the event?
• Could supply chain disruptions extend your recovery time?

Most Australian businesses choose 12 or 18 months, but some need 24 months or longer depending on their industry and circumstances.

Simple Examples

• A restaurant suffers a kitchen fire and needs a full refit. The rebuild takes 8 months and it takes another 4 months to get back to full trading. A 12-month indemnity period just covers it.
• A manufacturer’s factory is destroyed by storm damage. Rebuilding takes 14 months and it takes another 6 months to get production back to normal. A 12-month indemnity period would fall short. They’d need at least 24 months.
• A retail shop has a burst water main. Repairs take 3 months. The shop reopens but it takes another 3 months to rebuild foot traffic. A 12-month period is more than enough.

Common Mistakes or Misunderstandings

• Choosing the shortest period to save on premiums. The premium difference between 12 and 18 months is usually small compared to the risk of running out of cover.
• Only thinking about the physical rebuild. The indemnity period needs to cover the full recovery, including winning back customers and restoring revenue.
• Forgetting about delays. Council approvals, heritage restrictions, supply shortages, and specialist trade availability can all extend timelines significantly.
• Not reviewing it regularly. As your business grows, your recovery time may change. Review your indemnity period at each renewal.

When to Speak to a Broker

If you’re not sure how long your business would take to recover from a major event, or your current indemnity period was set years ago and hasn’t been reviewed, your broker can help you work through a realistic recovery timeline.

Need help?

If you want to make sure your business interruption cover has the right indemnity period, reach out to Tank Insurance and we’ll walk through it with you.

Related Terms

• Principle of Indemnity - The indemnity period is how this principle applies to business interruption, putting you back in the financial position you were in before the loss.
• Underinsurance - Choosing too short an indemnity period is a common form of underinsurance for Australian businesses.