Business interruption insurance

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Business interruption (BI) insurance — also called loss of income or consequential loss cover — replaces lost turnover and helps pay fixed costs when you cannot trade normally because of an insured event. The classic trigger is physical damage to your premises from fire, flood, storm or escape of water, covered under your property policy.

Property insurance fixes the building and contents; BI helps you survive the weeks or months while income dries up but rent, wages and loan repayments continue.

What it can pay for

• Lost gross profit — the profit you would have earned during the interruption period, calculated from your accounts and the basis stated in the policy (often gross profit or gross revenue)
• Standing charges — ongoing costs such as rent, business rates, loan interest and some staff wages for employees you keep on while closed
• Additional expenses — reasonable extra costs to minimise the loss or get trading again sooner, such as temporary premises or hiring alternative equipment
• Extensions — some policies cover loss caused by damage at a key supplier’s premises, denial of access, or failure of utilities (subject to sub-limits and wording)

How BI links to property insurance

BI is almost always bought alongside commercial property or combined trade insurance. There must be an insured physical damage event at your premises (or an extension trigger such as supplier damage) before BI responds. If your policy excludes flood and you suffer flood damage, neither property nor BI may pay — which is why accurate disclosure of your location and construction matters when you apply.

Indemnity period — how long benefits last

The indemnity period is the maximum time the insurer will pay BI after the damage occurs — commonly 12, 18, 24 or 36 months. Choose a period long enough to rebuild, refit and win customers back. A pub after a kitchen fire, or a salon after major flood damage, may need many months before turnover returns to normal. Under-estimating the indemnity period is a common reason claims fall short.

Sum insured and under-insurance

You declare an annual sum insured for BI, often based on your gross profit or revenue plus standing charges. If you under-declare, insurers may apply average (also called under-insurance) and pay only a proportion of the loss. Review your BI sum insured every year and after any expansion, new branch or significant change in turnover.

What BI does not usually cover

• Loss from pandemics, infectious diseases or government lockdowns — unless specifically bought and available (many policies excluded COVID-19)
• Gradual deterioration, wear and tear, or uninsured perils
• Pure economic downturn with no insured property damage
• Fines, penalties or uninsured liabilities

Examples by sector

Pubs: A fire in the kitchen closes the bar for three months. BI can cover lost wet and dry sales while you still pay rent and core staff. See Pub Insurance 4u.

Salons: Flood damage to the ground floor stops appointments for several weeks. BI helps with lost treatment income and ongoing costs. See Salon Insurance 4u.

Trades: BI is less common for mobile-only trades without premises, but businesses with workshops or stock at a fixed address often add it to their package.

Making a BI claim

Keep detailed records from day one: turnover before the incident, invoices, payroll, bank statements and extra expenses. Notify your broker as soon as you know trading will be affected. See our guide on making a business insurance claim.

Speak to our team if you want to check your indemnity period and sum insured, or get a quote through the specialist site for your business.