Business interruption insurance

Cover for lost income when something stops you trading.

What it means

Business interruption insurance covers loss of gross profit and increased costs of working following an insured event such as fire, flood or, sometimes, damage at a supplier.

Why it matters

Property insurance rebuilds the premises; business interruption pays the bills while you cannot trade. Most businesses that fail after a fire fail from the second thing, not the first.

What it looks like in practice

The indemnity period is the critical setting — how long the policy pays for. Twelve months is standard and is frequently too short for a business needing to rebuild and re-establish trade.

What to watch out for

Sums insured based on turnover rather than gross profit as the policy defines it. Underinsurance triggers average, and the claim is reduced proportionately.\n\nThe pandemic litigation showed how narrowly extensions are read.

Where to get proper advice

An insurance broker who understands your sector. Read the policy wording, not the summary.