Business interruption (loss of profit): What it is and how to successfully claim compensation

Imagine this: your business is running smoothly. Customers are coming in, sales are steady, and your income depends on uninterrupted activity. Suddenly, something happens that you didn’t plan for: a fire, a flood, poorly executed construction work, an accident, a serious breakdown, or even an administrative decision that forces you to close or operate at reduced capacity.

From one day to the next, your income disappears, but your expenses remain.

The question is inevitable:
Who compensates you for the money you stopped earning?

This is where business interruption or loss of profit comes into play — one of the most important claims for a business, and also one of the most disputed by insurers.

What Is Business Interruption (Loss of Profit)?

Business interruption refers to the loss of income or profit suffered by a business as a direct consequence of a covered event. It is not about material damage (that is compensated separately), but about what the business would have earned if it had been able to operate normally.

In other words, we are not talking about expenses, but about profits not obtained.

Common examples of loss of profit

• A restaurant that cannot open for weeks after a flood.
• A retail shop forced to close due to construction work or structural damage.
• A workshop unable to operate because essential machinery was damaged.
• A clinic losing appointments and treatments due to inadequate operating conditions.
• A business that reopens partially but with reduced capacity.

In all these cases, the damage does not end when the premises are repaired:
👉 the real impact lies in the time without generating income.

Business Interruption Is Not the Same as Material Damage

This distinction is crucial and often misunderstood.

• Material damage: the cost of repairing or replacing damaged property (premises, machinery, installations).
• Loss of profit: the money the business failed to earn while it could not operate normally.

Many insurers focus on paying material damage quickly, but reduce or minimize loss of profit, which is often the most significant part of the claim.

When Can Loss of Profit Be Claimed?

Loss of profit can be claimed when there is a direct link between the event and the loss of income, for example:

• Total closure of the business.
• Partial or limited operation.
• Delays in reopening attributable to the incident.
• Loss of customers due to temporary relocation.
• Functional uninhabitability of the premises, even if they are not destroyed; this introduces an important concept, as uninhabitability and loss of profit are different concepts — related, but both can be compensated simultaneously in a business context.

📌 The business does not need to be completely closed for loss of profit to exist.

How to Prove Loss of Profit to the Insurer

Insurers often demand extensive documentation and set a very high bar. Proper preparation is essential.

1. Proving the business was operating before the incident

To demonstrate that the business was active and viable, you may provide:

• Tax returns and quarterly filings.
• Historical invoicing.
• Receipts, contracts, reservations, or orders.
• Comparisons with previous financial years.

👉 Even businesses under simplified accounting or flat-rate tax systems can justify loss of profit, despite what insurers may claim.

2. Correctly calculating the loss of profit

Loss of profit is not speculative; it is calculated using real data.

Factors considered include:

• Average turnover before the incident.
• The same periods in previous years.
• Business seasonality.
• Usual margins and fixed operating costs.

A common mistake is accepting quick calculations that do not reflect the true business reality.

3. Justifying the indemnifiable period

One of the main points of dispute is the period the insurer considers compensable.

Loss of profit should cover:

• The reasonable time required for repairs.
• Delays directly resulting from the incident.
• Actual replacement time for machinery or installations.
• The period needed to return to normal business activity.

📌 The insurer should not only cover a “theoretical” timeframe, but the real and technically necessary period.

Common Insurer Tactics to Pay Less

At MataSeguros, we see the same arguments repeatedly:

“You can’t prove you would have earned that money.”
👉 It can be proven using historical data, comparisons, and objective figures.

“The business could have continued operating.”
👉 In many cases, real operational impossibility exists even without formal closure.

“The loss period is excessive.”
👉 Loss of profit covers the reasonable recovery time, not an overly optimistic estimate.

“The documentation is insufficient.”
👉 Lack of complex accounting does not eliminate real economic loss.

Why Many Loss of Profit Claims Are Underpaid

In practice, the issue is rarely a lack of coverage, but rather that:

• The calculation does not reflect how the business truly operates.
• Key seasons or revenue peaks are ignored.
• The compensation period is shortened without justification.
• Automatic reductions are applied without clear explanation.

The result is that the business absorbs part of the loss without understanding why.

When Should a Loss of Profit Claim Be Reviewed?

It is advisable to review a case when:

• The compensation does not cover the real impact of the closure.
• The business took longer to reopen than the insurer acknowledges.
• The claim was closed too early.
• Activity resumed but losses remain evident.
• There are doubts about how the amount was calculated.

📌 A technical review can make the difference between accepting a loss and recovering it.

How MataSeguros Can Help You

At MataSeguros, we approach loss of profit claims with a technical, realistic, and business-focused perspective, not just a policy-based one.

• We analyze whether the calculation reflects real business activity.
• We justify the reasonable loss period.
• We review reductions, limits, and applied criteria.
• We defend the claim against the insurer.

👉 If there is nothing to claim, we will tell you clearly.
👉 And if there is, we will explain where money is being lost.

📌 Review Your Case with No Obligation

If your business has suffered a closure, reduced activity, or loss of income after an incident, we review your case at no cost to check whether the loss of profit has been correctly calculated.

This is not about claiming more without reason, but about recovering what truly corresponds to you.

👉 Review your case with MataSeguros