What does industrial special risks insurance cover?

Industrial special risks insurance may cover physical loss or damage to insured buildings, stock, contents, plant and machinery, plus resulting business interruption, subject to the schedule, limits, exclusions and endorsements.

ISR policies commonly use broad all-risks wording. Cover starts with physical loss or damage and then removes what the policy excludes. This is broader than many packaged policies, which work through defined sections and listed events. But all-risks isn't a blank cheque. The schedule, what's excluded and which extras apply shape how the policy responds.

At a glance

• Section 1 covers material loss or damage to insured assets
• Section 2 covers business interruption following insured damage, including selected extras where they apply
• ISR commonly uses broad all-risks wording
• Not every asset type or cause of loss is covered
• Machinery breakdown, flood and employee dishonesty must be checked
• The endorsements matter as much as the base wording

ISR coverage and common limitations

This table shows how common events may be treated under an ISR policy. Every outcome depends on the wording and endorsements.

Section 1: material loss or damage

Section 1 is the property side. It may cover insured assets against loss or damage, subject to exclusions and endorsements.

Buildings. Offices, factories, warehouses, sheds and outbuildings. Values are commonly set using rebuild or replacement costs rather than market value, based on the policy's basis of settlement. If a building isn't on the schedule, it may not be covered.

Contents and fit-out. Furniture, fixtures, tenant changes, signage and internal fittings. If the business is a tenant, check what you're meant to insure versus what the landlord's policy covers.

Stock and raw materials. Finished goods, work in progress, raw inputs and stored materials. The stated value should account for peak stock levels to avoid a shortfall at claim time. A seasonal-increase clause can help where stock fluctuates.

Plant and machinery. Fixed and mobile equipment, processing lines, tools and specialist items. Cover may respond to fire, storm, impact, theft and accidental damage. Internal failure usually needs a separate breakdown extension (see extensions below).

Reinstatement costs. Debris removal, demolition, temporary protection, professional fees and fire-fighting costs may be included, subject to limits.

Section 2: business interruption

Section 2 covers the financial hit when insured damage stops or reduces normal work. It responds following insured physical damage, including damage covered through selected supplier, customer, utility or access extras.

Lost gross profit. The profit the business would have earned during the recovery period. The stated values, limits and indemnity period together shape how much the policy can pay.

Extra cost of working. Spending to keep the business running during repairs. Temporary premises, faster freight, overtime or rented equipment. These costs must be reasonable and aimed at cutting the downtime loss.

Lost rent. For building owners, rental income lost while the premises are unfit for tenants after insured damage. The stated rental value and indemnity period must reflect the time it would take to repair and re-let the space.

Claims preparation costs. Professional fees for preparing the interruption claim (accountants, loss adjusters) may be included where the wording provides for them. Check whether this is automatic or needs to be selected.

Indemnity period. The maximum window over which an eligible loss may be measured. If the period ends before the business finishes its recovery, later eligible losses may fall outside the cover. Match it to a worst-case rebuild timeline.

Industrial special risks insurance claim examples

These examples show how Section 1 and Section 2 may work together in practice. They're for illustration only and don't guarantee a claim outcome.

Optional ISR insurance extensions

Extensions add, adjust or remove parts of the base wording. They aren't standard across every policy. Check which ones apply before relying on the cover.

1. Machinery breakdown. May cover sudden internal failure of insured plant and equipment. Without it, a motor burnout or compressor failure may sit outside the standard wording.
2. Flood. May be included, excluded or restricted by site. In mapped flood zones, an insurer may offer flood cover with a higher excess or a sub-limit. Check the definition of "flood" in the policy, as it may differ from "escaped water."
3. Employee dishonesty. May cover specified dishonest acts by staff where the extension applies. Usually subject to per-event and aggregate limits.
4. Prevention of access. May cover selected downtime following insured damage nearby that prevents or restricts access, based on the extension wording.
5. Public utilities. May cover selected downtime caused by insured damage at a specified utility provider's site.
6. Customers and suppliers. May cover downtime following insured damage at nominated or eligible dependency sites, subject to limits and the extension wording.
7. Seasonal stock increases. Adjusts cover for businesses whose stock values peak at certain times, such as retailers before Christmas or wholesalers before a harvest.

What does Industrial Special Risks insurance exclude?

Common exclusions or restrictions may include the following, based on the policy.

• Upkeep and defects. Wear and tear, gradual decay, corrosion, rust, mildew, vermin and inherent defects. Faulty design or work may also be excluded, though the resulting damage to other assets (such as fire caused by defective wiring) may still be covered under some wordings.
• Pollution. Seepage, environmental clean-up and disposal costs. Limited resulting-damage cover may apply, but the clean-up itself is usually excluded.
• Natural perils where restricted. Flood, storm surge, actions of the sea and location-specific catastrophe risks may be excluded, restricted or subject to special excesses and limits. These are often negotiable through endorsements. See the extensions section above.
• Assets needing separate cover. Road-registered vehicles (commercial motor), goods in overseas transit (marine cargo), money and negotiable instruments, building or alteration work outside the policy's permitted limits, livestock, growing crops and assets in the open air where excluded.
• Other common exclusions. Cyber and data loss, terrorism, war and nuclear risks (subject to legislation and specialist arrangements), asbestos-related claims and worker injury (workers compensation is separate).

These gaps are typically filled by separate policies. A business holding ISR commonly also arranges public and products liability, workers compensation, cyber insurance, commercial motor, marine cargo, environmental liability or construction cover as needed.

Five checks before assuming a loss is covered

Before relying on the policy for a particular asset or event, run through these five questions.

1. Is the asset insured? The policy defines what counts as insured property. Items outside that definition, or items specifically excluded, won't respond.

2. Is the site on the schedule? Cover usually applies to listed sites. A new warehouse, a leased storage unit or a temporary site may not be covered unless it's been added.

3. Is the cause excluded? The all-risks wording covers physical loss or damage unless the cause is excluded. Check the exclusions and read any endorsements that may delete or reinstate specific items.

4. Is the right extension included? Breakdown, flood, dishonesty, transit, supplier downtime and other items may need a specific extension. If it isn't included, the loss may fall outside the cover.

5. Are the limit and indemnity period enough? A valid claim can still fall short if the stated value is too low, the sub-limit is capped or the business interruption indemnity period runs out before the business recovers.

These five questions apply to every ISR claim. Ask them before the loss happens, not after. If the answer to any of them is no, speak to your broker before relying on the cover.

How upcover can help

upcover arranges industrial special risks insurance for eligible Australian businesses. Options can be compared using consistent sites, stated values, interruption periods and requested extensions, making coverage differences easier to spot.

For an overview of ISR, see what is industrial special risks insurance. To compare ISR with a business pack, see ISR vs business pack insurance.

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Frequently asked questions

Does ISR cover buildings and contents?

They may be covered where the buildings and contents are on the schedule with the right stated values. Cover may respond to insured events such as fire, storm, impact and theft, subject to the policy terms.

Does ISR cover business interruption?

It commonly does. Section 2 may cover lost gross profit, extra cost of working and other chosen items following insured material damage. The stated values and indemnity period must be enough for the realistic recovery time.

Does ISR cover flood?

It depends on the policy. Flood can be included, excluded or restricted by site. An insurer may offer flood cover with a sub-limit, different excess or location-specific restrictions. Flood and escaped water are defined differently in many policies.

Does ISR cover machinery breakdown?

Internal breakdown isn't automatically covered under every ISR wording and may need a dedicated extension. Without it, a motor burnout or compressor seizure may fall outside the cover.

Does ISR include public liability?

Usually no. ISR focuses on property and business interruption. Public and products liability is arranged as a separate policy.

Does ISR cover supplier or customer interruption?

It may, where the relevant supplier or customer extension is included. Cover depends on insured damage at the specified or eligible dependency, the applicable limit and the extension wording.

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_{The information in this article has been prepared without taking into account your individual needs, objectives or financial situation. It should not be relied upon as personal advice. All insurance products arranged through upcover are subject to the terms, conditions, limits and exclusions contained in the relevant policy wording and Product Disclosure Statement. Before deciding whether a particular insurance product is right for you, please read the relevant PDS and consider your personal circumstances. upcover Pty Ltd ABN 17 628 197 437 is a Corporate Authorised Representative (CAR 1299211) of Experience Insurance Services Pty Ltd ABN 41 657 596 506, AFSL 539078. upcover arranges insurance products with selected insurers and underwriters and does not compare all general insurers or insurance products available in the market.}