What business interruption insurance does
Property insurance rebuilds your premises after a fire or flood — but it doesn't pay the wages, rent and lost profit while you can't trade. That's the job of business interruption (BI) cover: it replaces the income your business would have earned during the recovery period, keeping you solvent while the physical damage is fixed.
For most firms the interruption costs more than the damage. A kitchen fire in a restaurant might cost £40,000 to repair — and £150,000 in lost trade over the months it takes to reopen and rebuild custom.
What it covers — and for how long
BI typically covers lost gross profit (or revenue), ongoing fixed costs like rent and salaries, and increased costs of working — the extra spend to keep trading, such as temporary premises. It responds to interruptions caused by an insured event under your property policy: fire, flood, storm, escape of water and similar.
The critical setting is the indemnity period — how long payments continue. Twelve months is the default, and it's frequently too short: rebuild, refit, restock and win back customers routinely takes 18–24 months. Choosing 24 months costs a little more and is very often the right call.
Getting the sums right
Underinsurance is the classic BI failure. The sum insured should reflect your gross profit as insurers define it (turnover minus uninsured variable costs) across the whole indemnity period, projected for growth — not last year's accounts. If you insure for half the true figure, insurers can proportionally halve the payout. An annual review as the business grows keeps the number honest.
Useful extensions
Standard BI needs damage at your premises. Extensions widen the trigger: suppliers/customers (their fire stops your production), denial of access (your street closed by an incident nearby), utilities failure, and loss of attraction. Cyber events generally need separate cyber cover — a lesson many firms learned the hard way.
Getting the right policy
BI is normally bought inside a combined business policy, but the settings — indemnity period, sum insured, extensions — deserve real attention, because they decide whether the cover works when you need it. A specialist broker will size it properly. Find a business insurance specialist through Nesto — free, no obligation.