01 / The meaning
What it means.
For insurance purposes, a business interruption policy’s definition of gross profit may differ from the figure labelled gross profit in the accounts. The treatment of stock, purchases, wages and uninsured working expenses can change the calculation. A broker and accountant should work from the actual wording when considering declared values, rather than copying a financial statement line without checking its meaning.
Profit is also different from turnover and cash flow. A business may record revenue before receiving payment, continue paying fixed costs during a shutdown and recover some postponed sales later. These distinctions matter when estimating an interruption loss and choosing an indemnity period. Forecast growth, seasonal peaks and the time needed to regain customers should be explained through evidence, not assumed.
02 / Put it in context
A practical example.
Hypothetical example: A retailer records $200,000 in sales and $120,000 in cost of goods, leaving $80,000 before other expenses on a simple accounting basis. That illustration does not establish the policy’s gross-profit value or the amount payable following an insured interruption.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Use the policy’s profit definition and specified expense treatment.
- Reconcile revenue, stock and wage figures with the accounts.
- Consider trends, seasonality and the realistic recovery period.
04 / Start a useful conversation
A question for your broker.
Does the profit figure in our accounts match the insurance calculation?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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