Buying a Home
Remortgaging
Landlord
Specialist
Secured Loans
Debt Consolidation
Conveyancing
Finding a Solicitor
Business Insurance
Business interruption insurance replaces the income and fixed costs your business loses after a covered event, such as a fire, flood, or denial of access, stops you trading normally. Here's what it covers, how payouts are calculated, and how to make a claim.
Business interruption insurance is cover that replaces the income and fixed costs your business loses after an insured event stops you trading, such as a fire, flood, storm damage or being denied access to your premises. It doesn't pay for physical damage itself, that's what buildings and contents insurance is for, it pays for the knock-on financial impact: lost revenue, rent, salaries, and other fixed costs while you're unable to operate normally.
The right sum insured and indemnity period depend on your business's fixed costs, how long a genuine recovery would take, and your individual risk profile, which is why cover needs and claim outcomes vary from one business and policy to the next.
Business interruption insurance is cover that replaces the income and fixed costs your business loses when an insured event forces you to stop trading or trade at reduced capacity. It's designed to put your business back in roughly the financial position it would have been in if the disruption hadn't happened.
It's easy to confuse with buildings or contents insurance, but the two do different jobs. Buildings and contents cover pays to repair or replace the physical damage, a burnt-out unit, flooded stockroom, or broken equipment. Business interruption cover pays for what happens next: the rent, payroll, loan repayments, and lost profit while you're unable to trade normally. Most businesses buy the two together as part of a wider business insurance guide package, because damage and disruption usually happen at the same time.
Business interruption cover works as an extension to a property or commercial combined policy, rather than something you buy on its own. Because of that link, a business interruption claim usually only pays out if it follows an event that's also covered under the underlying property section of your policy, such as fire, flood or storm damage, unless you've specifically arranged non-damage or denial of access cover as well.
Two things shape how much you can claim and for how long: the sum insured and the indemnity period. The sum insured is the maximum amount the policy will pay out, usually based on your annual gross profit. The indemnity period is the maximum length of time payments can run for, chosen when you take out the policy. Both need to be set realistically for your business, because getting either wrong is one of the most common reasons a payout falls short of what a business actually needed.
Cover varies between insurers and policies, but most business interruption policies respond to a similar set of scenarios. A good example of a business interruption is a restaurant forced to close for several weeks after a kitchen fire, or a shop unable to trade because a burst water main has closed the whole street. In both cases, the physical damage might be covered elsewhere, but it's the business interruption section that replaces the lost trading income while repairs or access issues are sorted out.
Most policies also carry a similar set of exclusions, and it's worth checking these carefully before you rely on a policy in a real disruption.
Contingent business interruption cover, for damage at a supplier's or customer's premises rather than your own, is often overlooked but can matter just as much. If your business depends on one supplier or one big customer, ask specifically whether that's included, because it isn't automatic on every policy.
Business interruption insurance isn't a legal requirement in the UK, but it's often a condition of a commercial lease or a business loan, and it's worth thinking about seriously even where it isn't required. Whether it's worth the cost depends on how exposed your business actually is.
Sole traders and limited companies can both take out cover, and the decision is optional either way, though limited companies with premises, stock or staff typically have more to lose from an uninsured disruption. If a key individual, rather than the premises, is what your business can't function without, it's worth also looking at key person insurance, which protects the business financially if that person dies or is seriously ill, a different risk to business interruption cover. If you're a company director, directors' and officers' insurance is worth understanding too, since it protects you personally against claims rather than protecting the business's income. And if you let out commercial property as part of your business, our landlord insurance guide explains the separate cover you need for the building itself.
Who tends to need it most
Business protection
Speak to an advisor about whether business interruption, key person, or directors' and officers' cover makes sense for your circumstances.
Insurers usually calculate business interruption cover using one of two methods. The gross profit method insures your annual gross profit (broadly, turnover minus variable costs like stock), which is then used to work out how much lost profit and ongoing fixed costs the policy would pay if you had to stop trading. The increased cost of working method instead covers the extra costs you'd reasonably incur to keep trading, such as renting temporary premises, on top of any lost profit. Many policies use a combination of both.
These figures are for illustration only, to show how the sum insured and indemnity period translate into a calculation. They aren't a quote, and every real claim depends on your policy wording, your actual accounts, and how the loss is assessed at the time.
One risk that catches many businesses out is underinsurance, sometimes applied through an "average clause" in the policy. If your declared sum insured turns out to be lower than your actual gross profit at the time of a claim, the insurer can reduce the payout by the same proportion, even on a genuine, otherwise valid claim. Setting your sum insured too low to save on premium is a common mistake, and it's worth reviewing the figure at least once a year as your business grows, rather than leaving it unchanged at renewal.
The indemnity period is the maximum length of time your business interruption policy will keep paying out for a single claim, agreed when you take out the policy rather than decided after a loss happens. Insurers commonly offer indemnity periods around 12, 24, or 36 months, and the right choice depends on how long it would realistically take your business to recover fully, not just how long repairs would take.
Choosing too short an indemnity period is one of the most common underinsurance mistakes businesses make. Rebuilding a damaged unit might only take a few months, but rebuilding your customer base, supplier relationships, and trading volumes back to where they were can take considerably longer. If the indemnity period runs out before your business has genuinely recovered, cover simply stops, regardless of whether you're still trading below normal levels.
There's no fixed price for business interruption cover, and every business is quoted individually based on its own risk factors. For a broader look at how premiums compare across different types of business cover, see our guide to business insurance costs explained.
Cost factors
Industry and sector risk
Higher-risk trades, such as those working with flammable materials or in flood-prone locations, are generally priced higher than lower-risk office-based businesses.
Sum insured and indemnity period
A higher sum insured and a longer indemnity period both increase the potential payout, and the premium is priced accordingly.
Location and flood risk
Premises in areas with a known flood or storm risk typically cost more to insure than those in lower-risk locations.
Claims history
A history of previous claims, on this policy or the underlying property cover, usually affects the price you're offered at renewal.
Security and fire-protection measures
Alarms, sprinklers, and other risk-reduction measures can help bring the cost down, because they reduce the likelihood and severity of a claim.
Fire, flood, and storm damage remain the dominant triggers behind business interruption claims in the UK, consistent with industry claims data published by the Association of British Insurers. These are the same perils that most often cause the underlying property damage that a business interruption claim usually depends on, which is one reason insurers assess the two together rather than treating business interruption as a separate risk.
Denial of access and supplier or customer disruption (contingent business interruption) are less common triggers overall, but they've drawn more attention since COVID-19-era test-case rulings clarified how far standard policies do, and don't, respond to non-damage events. If your business is particularly exposed to one of these less common causes, it's worth checking your policy wording rather than assuming standard cover applies.
The steps below outline the typical process for making a business interruption claim, though your insurer's exact requirements may vary.
If a claim payout doesn't stretch far enough to cover cash flow while your business recovers, it's worth understanding your wider borrowing options too. Our business loans guide explains how businesses can bridge a temporary cash flow gap, though it's worth noting that some forms of business borrowing are secured, and your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Claims process
Notify your insurer promptly
Report the disruption as soon as possible after the event, following the notification timescale set out in your policy. Delaying notification can complicate or weaken an otherwise valid claim.
Document your losses
Gather management accounts, sales records, invoices, and anything else that evidences your normal trading position and the financial impact of the disruption. The stronger your records, the easier it is to support the figures you're claiming.
Consider appointing a loss assessor
For larger or more complex claims, a professional loss assessor can help present your figures accurately and negotiate with the insurer on your behalf, usually for a fee.
Expect the insurer's own assessment
Your insurer will typically appoint their own loss adjuster to assess the claim and verify the figures, which is standard practice rather than a sign your claim is being disputed.
Know your options if a claim is disputed
If you disagree with the outcome, raise a formal complaint with your insurer first. If it remains unresolved, you can refer the matter to the Financial Ombudsman Service, which handles disputes between consumers and small businesses and financial firms.
Choosing a sum insured and indemnity period that genuinely match your business isn't something you should have to work out alone from a renewal letter. Money Saving Advisors compares business interruption cover across a wide range of insurers, and can talk through the exclusions and calculation method before you commit to a policy, not after a claim has already gone wrong. You can also compare the best business insurance providers to see how business interruption cover fits alongside your wider policy.
How we help
This guide is general information about how business interruption insurance works, not a personal recommendation. Cover needs, exclusions, and claim outcomes vary between businesses and policies, so it's worth speaking to an advisor about your specific circumstances before you buy or renew.
If you'd like free, impartial guidance on business finances more broadly, MoneyHelper offers independent support at moneyhelper.org.uk or on 0800 138 7777. If you've made a business interruption claim and remain unhappy with the outcome after complaining to your insurer directly, you can refer an unresolved complaint to the Financial Ombudsman Service, which can review whether your claim was handled fairly.
Independent and official guidance on business interruption insurance and making a claim.
Common questions
Business interruption insurance replaces the income and fixed costs a business loses after an insured event, such as fire, flood, or denial of access, stops it trading normally. It's usually an add-on to a property or commercial combined policy rather than a standalone product, and it pays for lost profit, rent, payroll, and other fixed costs rather than the physical damage itself.
A common example is a restaurant forced to close for several weeks after a kitchen fire, or a shop unable to trade because a burst water main has closed the surrounding street. Another example is contingent business interruption, where a key supplier's premises are damaged, stopping deliveries a business relies on, even though the business's own premises are untouched.
Insurers typically calculate cover using the gross profit method, insuring your annual gross profit (turnover minus variable costs), or the increased cost of working method, which covers the extra costs of keeping trading, such as temporary premises. The sum insured is usually based on your annual gross profit, and the indemnity period sets the maximum length of time a claim can pay out for. Both figures need to reflect your actual business to avoid underinsurance.
Fire, flood, and storm damage remain the most common causes of business interruption claims in the UK, consistent with industry claims data from the Association of British Insurers. This is because business interruption cover usually only responds following the type of underlying property damage these perils typically cause.
No, business interruption insurance is not a legal requirement in the UK. That said, it's often a condition set by a commercial landlord or a business lender, and many businesses choose to take it out anyway because the financial impact of an uninsured disruption can be far higher than the cost of cover.
It depends entirely on the specific policy wording. Most standard business interruption policies exclude pandemics unless a notifiable disease extension is specifically included and names the relevant illness, and this area of cover has been defined much more narrowly by insurers following COVID-19-era test-case rulings. It's worth checking this exclusion specifically rather than assuming standard cover would respond to a future outbreak.
What our clients say
Shortly after I spoke with Anna, she was also very helpful and made it effortless and a nice experience.
Had a really good experience regarding arranging a secured loan. They introduced me to a great advisor. Thanks for the help.
For once a loan transaction without stress and complications. Very impressed and highly recommended.
Thrilled to share my exceptional experience with Money Saving Advisors. The website made it incredibly simple and easy to connect with an advisor. They helped me find the best deal on my remortgage and secured a very competitive interest rate!
Great advice and money saved on mortgage.
I have previously declined a loan of the value I needed from various brokers, but this website found me a reputable broker with surprisingly decent rates.
