Business interruption insurance
Cover options for the income you lose and the extra costs you face when damage to your premises stops or slows your trading.
What is business interruption insurance?
Business interruption insurance (BI) covers the income you lose and the extra costs you face when damage to your premises, such as a fire or flood, stops or slows your trading. Buildings and contents insurance pays to repair the damage; business interruption covers what the damage costs your business while it's being repaired and you win back customers. It's usually part of a commercial property insurance or commercial combined insurance policy rather than a policy on its own.
PIB Insurance Brokers arranges business interruption cover as part of wider cover for manufacturers, shops, hospitality businesses, offices and other commercial premises. A broker can be particularly helpful when setting the cover is more complex, for example seasonal trading, reliance on one key supplier or customer, machinery with long lead times, or a sum insured you haven't checked for a while.
What business interruption insurance covers
Business interruption usually combines a core of covers with extensions, and the terms are set in the policy schedule. The summaries below are general examples of what may be covered in each section; your policy schedule and wording decide what is and isn't covered in any claim.
Core covers
Loss of gross profit or revenue
The drop in income after insured damage, based on your accounts, while you're unable to trade normally.
Watch for: "Gross profit" in an insurance policy is usually defined differently from your accounts. Ask your accountant or broker to check the figure.
Increased cost of working
Extra costs of keeping the business going, such as temporary premises, hiring equipment or overtime.
Watch for: Costs usually have to be reasonable and reduce the loss you would otherwise have had.
Indemnity period
The length of time the policy covers your loss, starting from the date of the damage. Common choices are 12, 18, 24 or 36 months.
Watch for: A period too short to rebuild, replace machinery and win back customers.
Continuing costs and wages
Costs that carry on while you can't trade, such as rent, loan repayments and staff wages, depending on how the cover is set up.
Watch for: Whether wages are covered in full or for a limited period.
Optional covers to consider
Suppliers and customers
Your loss when damage at a key supplier's or customer's premises disrupts your business.
Watch for: Limits on this extension, and whether suppliers need to be named.
Denial of access
Loss when you can't reach your premises because of damage nearby, such as a police cordon after a fire next door.
Watch for: Limits on the number of days and the distance from your premises.
Utilities failure
Loss caused by a failure of electricity, gas, water or telecommunications supply.
Watch for: Planned outages and short interruptions are usually excluded.
Notifiable disease
Loss caused by an outbreak of a listed disease at or near your premises.
Watch for: Pandemics and diseases not on the policy's list are usually excluded.
Book debts
Money you can't collect because your records were damaged.
Watch for: Debts that were already overdue.
Setting your cover
Business interruption only works if the figures are right. Check these at each renewal:
- The sum insured: usually based on your expected gross profit or revenue for the length of the indemnity period, not last year's figure.
- The indemnity period: think about how long it would take to repair or rebuild, replace key machinery, and win back customers who went elsewhere.
- Growth and seasonality: if you're growing or trade mostly at certain times of year, the figures may need adjusting.
- Declaration-linked cover: some insurers let you declare an estimate and adjust the premium later, which may reduce the risk of underinsurance.
Business interruption usually only pays if the damage is covered under your property insurance. Read more about commercial property insurance.
What business interruption insurance does not cover
Typical limits across business interruption policies:
- Losses without insured damage: a fall in trade for other reasons, such as a downturn or roadworks, isn't covered.
- Pandemics: closures from a pandemic are usually excluded unless you have a specific extension.
- Cyber events: loss from a cyber attack is usually excluded and needs cyber insurance.
- Losses beyond the indemnity period: income lost after the period ends isn't covered.
- Underinsurance: if your sums insured are too low, the insurer may reduce a claim in proportion (known as average).
- An excess on most claims: most covers carry an excess (the amount you pay before the insurer contributes), which varies by cover.
Conditions matter too: claims may also be reduced or declined if policy conditions aren't met. Common examples: the property damage isn't covered, the sum insured is below the true figure, or losses weren't reduced where possible.
How much does business interruption insurance cost?
There is no standard price. What you pay depends on your sum insured, the indemnity period you choose, your trade and premises, how quickly you could recover from damage, and your claims history.
What affects the cost
- Sum insured and period: a higher sum insured and a longer indemnity period usually cost more.
- Your premises and trade: fire protection, security and the type of work you do affect how likely damage is.
- How quickly you could recover: a business continuity plan and alternative premises or suppliers may help.
- A clean claims record: insurers usually look at the last three to five years.
Why work with PIB Insurance Brokers
We explore your options
We can approach insurers and set out the differences in cover, not just price.
We check your figures
The sum insured, the indemnity period and the gross profit definition may each need adjusting as your business changes.
We look for common gaps
An indemnity period too short to recover, no cover for key suppliers, or a sum insured based on out-of-date accounts.
Here when things change
Our team is on hand throughout the policy year for advice, whether your circumstances change or you're not sure what to do next.
What our clients say
Reviews from PIB Insurance Brokers clients across the sectors we work with, collected by Reviews.io.
Could your business survive a long closure? Check your cover.
Get a quoteFrequently asked questions
What does business interruption insurance cover?
It covers the income you lose and the extra costs you face while you can't trade normally after insured damage, such as a fire or flood at your premises. It may also cover continuing costs like rent and wages, depending on how the policy is set up.
How is a business interruption claim calculated?
Usually by comparing your gross profit or revenue during the interruption with what you would have expected to earn, based on your accounts and trends, then adding reasonable extra costs of keeping the business going. The policy's definitions and your sum insured affect the result.
Does business interruption insurance cover wages?
It may, depending on the cover. Wages are often included within gross profit, or covered separately for a set period. Check how your policy treats wages, especially if you'd want to keep staff on while you rebuild.