Understand business interruption insurance, what it covers, common pitfalls, and how to choose safe, adequate protection for your UK business without overspending.
A clear guide to protecting your income
Business interruption insurance helps replace lost income and pay necessary running costs when an insured event disrupts your operations. It does not fix the physical damage itself - that sits with property or contents insurance - but it funds your recovery period so you can pay wages, rent, and key suppliers while trading is reduced or paused.
Across the UK, many firms underestimate how long recovery really takes. Recent market data shows four in five SMEs are underinsured for interruption, with average shortfalls above 50%. A large share still have no cover at all, and where policies do exist, many choose 12 months when 18 to 24 months is often needed to rebuild capacity, reconnect supply chains, and win back customers. That gap can be the difference between survival and closure.
The risk picture has shifted. Courts have clarified aspects of pandemic-related claims and bespoke policies are more common, but disputes still arise around causation and wording. Cyber incidents, supply chain delays, late payments, and energy costs now sit alongside fires and floods as key disruption drivers. Average claims are rising as repairs take longer and cost more.
Insurance can offer real financial protection, but only when you understand what is covered - and where the gaps are.
This guide sets out how the cover works, what it includes and excludes, who it suits, and how to choose the right indemnity period and sum insured. We will keep the language clear and neutral so you can make a confident, informed decision.
What it covers and how claims unfold
Business interruption cover typically pays for reduced gross profit or revenue following an insured event, plus necessary increased costs of working that help you trade sooner. The trigger is usually physical damage at your premises, such as fire, flood, or storm, that is covered by your property policy. Many policies can also include non-damage extensions, such as supplier failure or denial of access, although these are always subject to strict wording and limits.
During a claim, insurers assess your pre-loss trading, the impact on turnover, and the extra costs you incur to keep operating. Payments are limited by two choices you make at the outset: your sum insured and your indemnity period. A café might need 18 months to rebuild and regain footfall after a serious kitchen fire, while a manufacturer could take 24 months to replace machinery and stabilise supply chains. If you only insured for 12 months, payments stop after month 12 even if you are still recovering.
Not everything is covered. Losses from uninsured events, general economic downturn, or delays unrelated to the insured peril are typically excluded. Some pandemic or notifiable disease covers exist but are tightly defined. Cyber-triggered interruption may sit under a dedicated cyber policy, so check the wording carefully. Claims must be evidenced with accounts, forecasts, and proof of extra costs. Insurers expect reasonable steps to mitigate losses, for example using temporary premises or outsourcing production where practical.
Who it suits
This cover is most valuable to organisations that rely on steady cash flow to meet fixed costs, or that would struggle to restart quickly after a disruption. That includes retailers, cafés, trades, manufacturers, professional firms, and digital businesses that depend on a single site, key supplier, or specialist equipment. UK surveys consistently place interruption risk near the top of business concerns, second only to cyber.
It may be less essential for very small micro-operations with minimal fixed costs, purely online models that can relocate instantly, or businesses with large unrestricted reserves that can carry losses without insurance. Even then, many underestimate recovery time. Only a small minority of risk managers report full confidence in their limits, which is why a measured review with a broker or adviser can prevent accidental underinsurance.
Choosing your level of protection
- Essential cover - gross profit or revenue basis
- Protects loss of income following insured property damage. Suits smaller firms needing simple, budget-friendly protection. Limited extensions. Common 12-month indemnity, but consider 18 months if supply chains are fragile.
- Standard cover with key extensions
- Adds increased cost of working, supplier and customer dependency, utilities, and denial of access where available. Better fit for businesses with single critical suppliers or specialist equipment. Indemnity period typically 18 to 24 months.
- Comprehensive cover - tailored to your operations
- Custom limits per location or revenue stream, stock throughput, contingent business interruption for tiered suppliers, and clause-by-clause wording improvements. Suitable where downtime is costly or recovery is complex.
- Optional add-ons
- Cyber-triggered business interruption under a cyber policy - helpful as SME cyber claims are rising, with long claim lifecycles.
- Advanced loss of profit for projects still under construction.
- Infectious disease and non-damage denial of access where offered, usually sub-limited.
- Declaration-linked basis - adjusts the premium to actual profits to reduce underinsurance risk.
Choose the longest indemnity period you reasonably need. Many UK recoveries take 18 to 24 months, and some insurers now offer automatic 24-month uplifts for SMEs after major losses like fire or flood.
What influences the price
| Factor | Typical impact on premium | What you can control |
|---|---|---|
| Turnover and gross profit | Higher revenue means larger potential loss | Keep financial records accurate and up to date |
| Indemnity period length | Longer periods cost more but reduce underinsurance | Select realistic 18-24 months if recovery is complex |
| Sector and activities | Higher-risk trades face higher rates | Document risk controls and training |
| Premises and location | Flood, crime, and construction type affect price | Improve physical protections and maintenance |
| Dependency on suppliers | Single points of failure drive cost | Build redundancy and dual sourcing |
| Claims history | Previous losses can raise premiums | Demonstrate improvements post-incident |
| Cyber exposure | Increased incidents can raise costs | Implement strong cyber hygiene and backups |
| Cover basis and extensions | Wider wording and higher limits cost more | Choose only relevant extensions |
Typical annual premiums vary widely, from a few hundred pounds for very small, low-risk firms to several thousand for larger or higher-risk operations. Market conditions in 2025 remain competitive, so strong risk management can help secure favourable terms.
Can you get covered
Most UK-registered businesses can apply, including sole traders, partnerships, and limited companies. Insurers usually ask for recent accounts, turnover and gross profit figures, rent and wage details, and information on suppliers, stock levels, and critical equipment. They may request a business continuity plan and details of fire, security, and cyber controls. Buildings cover is not mandatory to buy business interruption, but the trigger for many claims is property damage, so the policies often work together.
Applications can be declined where sums insured are unclear, where material facts are not disclosed, or where risk controls are inadequate. High flood exposure, poor electrical safety, or a history of frequent claims may restrict options. Being open, accurate, and prepared with documents will speed up underwriting and reduce the chance of surprises at claim time.
From quote to claim
- Gather accounts, turnover forecasts, and fixed cost details for underwriting.
- Identify critical suppliers and recovery time for key processes and equipment.
- Choose the cover basis, extensions, and an 18-24 month indemnity period.
- Provide a realistic sum insured using gross profit or revenue methodology.
- Compare quotes, policy wordings, sub-limits, and exclusions line by line.
- Bind cover and store documents, schedules, and claims contact details securely.
- If an incident occurs, notify your insurer immediately and start mitigation.
- Track lost revenue and extra costs to evidence and progress your claim.
Balancing benefits and drawbacks
| Pros | Cons |
|---|---|
| Replaces lost income so you can pay wages and fixed costs | Cover often needs property damage trigger unless extensions apply |
| Funds increased costs of working to speed up recovery | Wrong indemnity period can end payments too soon |
| Tailored options for suppliers, utilities, and access risks | Complex wording can cause disputes without expert guidance |
| Declaration-linked policies help reduce underinsurance | Non-damage extensions usually have tight sub-limits |
| Competitive UK market can mean broader cover at fair cost | Evidence requirements and forecasting can be time-consuming |
| Cyber and property risks can be addressed with combined approach | Some events, delays, or market changes may be excluded |
Check these before you buy
Read the policy schedule and wording carefully. Confirm the basis of cover, how gross profit is defined, and exactly which triggers apply. Check sub-limits for suppliers, customers, utilities, denial of access, and any infectious disease wording. Review the indemnity period and be realistic - many businesses need 18 to 24 months. Note any waiting periods, policy excesses, claim notification deadlines, and mitigation duties. Ask how declaration-linked adjustments work and how underinsurance is applied. Finally, confirm renewal terms, index-linking, and documentation you must keep to evidence a claim.
Alternatives to consider
- Cyber insurance - covers incident response, data breach costs, and cyber-triggered business interruption where included. Consider if you rely on IT and online trading.
- Property and contents insurance - repairs physical damage that often triggers interruption claims. Essential companion cover for most firms.
- Trade credit insurance - protects against non-payment by customers, helpful when late payments threaten cash flow.
- Equipment breakdown insurance - covers sudden mechanical or electrical failure. Useful where specialist machinery is critical.
Common questions
Q: Do I need business interruption if I work from home? A: If your income depends on equipment, stock, or a specific workspace, interruption cover can still help. Home insurance rarely includes this level of business protection, so check carefully.
Q: How long should my indemnity period be? A: Map your recovery steps from day one to stable trading. Many UK firms require 18 to 24 months to rebuild capacity, replace equipment, and recover customer demand. Choose the period you realistically need.
Q: What is declaration-linked cover and why use it? A: It sets a provisional premium and adjusts after the year based on actual results, helping reduce underinsurance if your turnover grows or fluctuates. You still need reasonable initial estimates.
Q: Are pandemics covered? A: Some policies include strictly defined notifiable disease or denial of access clauses with sub-limits. Many do not. Always check the exact wording and limits rather than assuming cover.
Q: Is cyber-triggered interruption included? A: Often it is not under standard interruption cover. Cyber policies can include business interruption arising from cyber incidents. If you rely on IT systems, consider dedicated cyber insurance.
Q: How are claims calculated? A: Insurers compare expected trading against actual results during the indemnity period and add agreed extra costs of working. You must provide accounts, forecasts, and proof of costs.
Q: Are rates going up in 2025? A: The UK market remains competitive with broader terms in some areas, but claims inflation and rising repair costs still influence pricing. Strong risk management helps secure better terms.
What to do now
Review your fixed costs, single points of failure, and realistic recovery timetable. Decide whether gross profit or revenue is the right basis and consider an 18 to 24 month indemnity period. Compare policy wordings side by side and ask for declaration-linked options. If you are unsure, speak to a regulated broker who can explain the choices in plain English and help you avoid underinsurance.
Important information
This guide is general information, not personal financial advice. Features, limits, and exclusions vary by insurer and policy wording. Always read your schedule and full terms, disclose material facts, and seek professional guidance before you buy.
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