Loss of gross profit
Income lost while the business is disrupted after insured damage, subject to the indemnity period chosen.
Farm Business Interruption Insurance
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Farm Business Interruption Insurance
Cover for lost farm income after insured damage.
Farm income does not stop evenly. If the dairy plant burns, milking stops that afternoon. If the packing shed goes, fruit is on the ground with nowhere to send it. Business interruption responds to income lost after insured damage, and the difficult part on a farm is defining what a normal year looks like when seasons are anything but normal.
What is it?
Farm business interruption generally follows an insured property loss and covers lost gross profit, increased costs of working and sometimes claims preparation costs. It fits enterprises with a continuous revenue line - dairies, poultry sheds, packing sheds, feedlots, gins, cellar doors - more neatly than a single-harvest cropping business. The indemnity period usually needs to span at least one complete production cycle.
What does farm business interruption insurance cover?
Increased cost of working
Extra costs to keep trading, such as hired plant, temporary sheds or contract processing elsewhere.
Supplier and utility extensions
Interruption caused by damage at a supplier, processor or to the power supply, where those extensions are included.
What affects the cost?
- Revenue and gross profit basis
- Indemnity period selected
- Length of the production cycle
- Reliance on a single shed or plant item
- Alternative or backup capacity available
Worth raising on the call
- An indemnity period shorter than one production cycle leaves a gap that only shows up at claim time.
- Farm interruption cover generally follows insured damage, so a drought or a poor season is not a trigger.
- Gross profit for a farm is calculated differently from a retail business and is worth getting right at renewal.
Claims we are commonly asked about
Dairy plant fire stops milking
A fire in the dairy destroys the plate cooler, vat and plant, and milking stops that afternoon while the shed is rebuilt over several months. Business interruption commonly responds to income lost across that period, following acceptance of the underlying property claim.
Packing shed out at peak season
A storm takes the roof off the packing shed at the peak of a stonefruit season and fruit cannot be graded or shipped. Increased cost of working typically funds packing elsewhere, while lost gross profit addresses what could not be sold at all.
Processor damage halts deliveries
A processor or the local power supply is damaged and cannot take product for several weeks, so production has nowhere to go. Whether anything is payable generally depends on whether supplier or utility extensions were taken and what those extensions require.
Worth confirming in the wording
- Worth confirming that the indemnity period covers at least one full production cycle, since twelve months can be short for tree crops, breeding herds or an enterprise that has to be replanted.
- Worth confirming whether supplier, customer, utility and prevention-of-access extensions are included, as these are commonly optional and separately limited.
- Worth confirming how gross profit is defined for a farm, since a definition drafted for a retail business can understate a seasonal agricultural income.
Common questions
Does farm business interruption cover drought or a bad season?
Generally not. Farm business interruption usually follows an accepted property damage claim, so it responds to a fire, storm or breakdown that stopped production rather than to seasonal conditions, commodity prices or water availability. Those risks sit outside standard cover and are managed commercially instead.
How long should my indemnity period be?
Long enough to rebuild, restock and get back to normal trading, which on a farm is often longer than people assume. A dairy or packing shed rebuild can take many months in a rural area, and a tree crop or breeding herd can take years to return to full production. Twelve months is common but is not always sufficient.
Does it cover me if the power goes out for days?
Only where a public utility extension has been included and the interruption meets its terms, which usually require damage at the supply undertaking rather than simply an outage. Many policies also apply a waiting period before anything becomes payable. It is worth confirming this specifically if your operation depends on continuous power.
What does farm business interruption cover cost?
It depends on the gross profit sum insured, the indemnity period selected, the length of the production cycle, how heavily the operation depends on a single shed or plant item, and whether alternative capacity exists. Because the sum insured drives most of it, getting the gross profit figure right is the main task at renewal.
General information only. Cover, limits and exclusions depend on the PDS, TMD, eligibility, underwriting and the policy terms. See farm insurance for the wider picture.
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