Compare business interruption insurance

When a business experiences a crisis that leaves it unable to operate for a period, the fallout can be catastrophic. 

Business interruption insurance aims to help your business cope with a crisis by recovering the profits lost by being out of action.

When a business experiences a crisis that leaves it unable to operate for a period, the fallout can be catastrophic. 

Business interruption insurance aims to help your business cope with a crisis by recovering the profits lost by being out of action.

Emily Kindness
From the Business team
7
minute read
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Last Updated 12 APRIL 2022

What is business interruption insurance? 

Business interruption insurance, also known as BI insurance, is a special kind of cover that can help compensate you for loss of sales or profits if your business is unable to operate for a period for some unexpected reason.

It aims to put your business back in the same trading position had the unfortunate events not happened in the first place. The right policy could: 

  • Give you the financial support you need to get back to trading
  • Help pay your employees in a difficult time
  • Keep you up and running while you rebuild

Business interruption cover is often included as part of a business insurance package, especially those taken out by shops, restaurants, pubs, salons and offices. Not all policies include BI though, so check the wording carefully and talk to your insurance provider when arranging cover. In most cases, you should be able to add it as extra cover.

Is business interruption insurance a legal requirement? 

You’re not legally required to have business interruption insurance, but it’s worth considering if sudden closure of your premises or a break in your supply chain could stop you from doing business for some time. 

Even if you could manage financially for a few weeks, you might lose out to competitors during that time if your customers have to go elsewhere. 

For many small businesses, business interruption insurance could be the difference between temporary closure and having to shut up shop indefinitely.

What events are covered by business interruption insurance?

There are a number of events that could impact your business’s ability to trade, including: 

  • A fire or flood that damages key office space or important stock
  • Breakdown of equipment that’s fundamental to your business operations
  • A key supplier is unable to reach you, damaging your ability to sell stock

If any of these things happen, your business could incur unexpected costs and the ability to generate income would be severely affected, especially if you’re forced to close for a period of time. Business interruption insurance could cover you against these losses, helping you to stay in business while you get back on your feet again.

What’s not covered by business interruption insurance? 

Certain events are typically excluded from general business interruption insurance - for example cyber or terrorism risks, but both of these can be covered with additional specific cover if needed.

Your insurance provider will talk you through exactly what events would be covered, which ones aren’t, and what can be added as extra cover. 

Business interruption cover can vary between providers, so it’s important to check what’s included to help you choose the right level of cover for your business.

Why would I need business interruption insurance on top of my other business insurance? 

Although buildings, fixtures, fittings and stock are often covered under a standard building and contents policy, it will only help you replace or fix what’s broken, not recover lost income and compensate for unexpected costs.

Business interruption insurance can help cover your lost earnings if you’re unable to trade from your premises while repairs are being made. 

For example:

Your business premises suffer extreme flood damage. You arrive at the office or shop to find your computers or stock floating around in 3ft of water. No problem, your buildings and contents insurance can cover these losses. But the building itself could take weeks or even months to dry out enough to work from again. Business interruption insurance could cover your loss of income and any extra expenses you incur until you’re up and running again.

What will I be compensated for if I need to make a claim? 

If you need to make a claim, business interruption insurance may compensate you for:

  • Any (pre-tax) shortfall in profits.
  •  Any increased costs in running your business as a result of a covered event - for example extra accountant fees or rental costs for temporary relocation.
  •  Employee wages when you’re unable to make the payroll because you cannot operate.
  • Tax coverage if you’re unable to make HMRC deadlines because of a fall in profits due to an insured event.
  •  If you’re unable to cover monthly loan repayments because you’re not generating a business income due to an insured event.

Check with your insurance provider about the exact compensation costs they offer to make sure their policy is right for your business.

What do I need to do in order to claim?

You’ll need to provide supporting evidence of your business’s trading performance so your insurance provider can accurately calculate your premium and, if need be, any potential payouts.

Top tips for a successful claim:

  • Go through the policy wording with a fine tooth comb. It’s vital that you know exactly what you can claim for, what you can’t, and any conditions that might apply.
  • Gather together as much information as you can from the very start of your claim. The more supporting evidence you have to demonstrate your loss of revenue for an insured event, the more likely your claim is to be successful.
  • Understand and stick to your insurance provider’s claims process to ensure your claim goes through as smoothly as possible. Pay particular attention to correct formatting and timings to avoid any delays as your claim moves through the system.

What else should I consider when arranging business interruption insurance? 

Whether business interruption is included in your business insurance package or you want to add it as extra protection, consider these factors: 

  • Indemnity period – BI insurance can be set to cover a specific period - this could be 12, 24 or 36 months. Think realistically about how long it will take for your business to recover from an insured event, as it can often take much longer than you’d expect.
  • Accurate values for your assets – consider using a professional valuation service to work out how much cover you may need.
  • Consider potential risks – from flooding to cyber threats, establish the real risks that could affect your business so you can mitigate them with a suitable insurance policy. 

When you compare with us, you can choose the cover options you want to create a tailored business insurance package to suit your business needs. Just give us a few details about you and your business and start comparing today.

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Frequently asked questions

Does business interruption insurance cover COVID-19?

If you buy a new business insurance policy, it’s unlikely to cover claims against events that have already happened or are currently taking place. This means COVID-19-related claims are unlikely to be covered.

Find out more information on business insurance and coronavirus here

How much cover would I need?

The amount of cover you may need will be specific to your particular business. Think about your turnover, profit and monthly cash flow movements to work out what you would need to stay up and running if the worst should happen.

Business interruption policies will have a maximum coverage limit, so check it’s enough to cover your operating expenses while you’re waiting to get back on track.

Can I make a claim on my BI insurance if I can operate from another location?

If you can’t stay in your business premises but you can work from another location, check your policy wording to see what it may cover. Some policies will cover extra expenses such as rent and relocation costs, while others may not cover you if you’re still able to trade.

Can I get business interruption insurance as a landlord?

If you’re a landlord and have landlord insurance, check to see if you have rental income protection included in your cover. This is a type of business interruption insurance that can protect your rental losses if your building is damaged and you can’t rent it out.

Do I need business interruption insurance?

If you run a business that doesn’t rely on stock, suppliers or a specific business premises, business interruption insurance may not be necessary.

But if you hold a lot of stock, employ staff and need your premises in order to operate – for example, if you have a shop, restaurant, pub or salon – then business interruption insurance could offer essential cover to keep you up and running. 

You also need to think about your customers. Even the most loyal will go elsewhere if you’re unable to do business for a period of time – just a couple of months of downtime could see a significant drop in sales and revenue. Can you afford for your business to stop for just a few weeks? If the answer is no, then business interruption cover is definitely worth considering.

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