What is Business Interruption Insurance?
Business Interruption Insurance covers ongoing expenses – like wages, rent or mortgage repayments—when your business is unable to trade due to an insured event, such as fire or storm damage.
After a major incident, businesses can be out of action for weeks or months while machinery is replaced, buildings repaired, or stock sourced. This cover steps in to:
- Replace lost net profit
- Pay additional costs to reduce disruption
- Cover fixed overheads (e.g. wages, utilities)
Cover runs from the date of the incident until the business returns to pre-loss levels (or projected performance).
How Much Cover Do You Need?
Choosing the right indemnity period – the time your insurer will continue to pay – is key. Consider how long it could take to:
- Rebuild or repair your premises
- Regain lost customers or market share
- Replace key equipment or stock
Businesses often face increased short-term costs to stay operational, such as leasing temporary space or paying for alternative suppliers. These costs are typically covered.
A 12-month indemnity period is a common starting point.
What Affects the Premium?
- Type of business – e.g. professional services, wholesaler, retailer
- Length of indemnity period
- Payroll – how much and for how long do you need to insure staff wages? (Redundancy cover may be included)
- Reliance on specific suppliers or customers
How is it Calculated?
Two main methods:
- Weekly Income or Sales – suited to small businesses
- Annual Gross Profit – turnover less variable expenses (used for wholesalers, manufacturers, and property owners)
Service-Based Businesses
Professional services (like legal or IT firms) may not need full profit cover but can still face major costs. Cover typically includes relocation, temporary office hire, and equipment replacement – expenses that add up quickly, even for smaller firms.
Business interruption is one of the biggest risks facing any business. A prolonged loss of income can be financially and emotionally draining.
Speak to MakSure Risk Advisers to ensure your business is properly protected.