Pillar Guide · Updated July 2026
Business Interruption Insurance: A Complete UK Guide for 2026/27
A fire, flood or other insured event can stop a business trading long after the physical damage is repaired, and standard property insurance does not cover the lost income during that time. Business interruption insurance fills that gap. This guide explains what it covers, how the indemnity period and sum insured are set, common exclusions, and how it fits alongside other business insurance.
What Business Interruption Insurance Covers
Business interruption insurance (sometimes called business income insurance) replaces lost income and covers certain ongoing fixed costs — such as rent, salaries and loan repayments — when a business cannot trade normally following an insured event, most commonly fire, flood, storm damage, or theft, that also triggers a valid claim under an underlying property or contents policy. It is generally sold as an add-on to, rather than a replacement for, buildings or contents insurance.
How It Differs from Property Insurance
Property insurance pays to repair or replace damaged buildings, stock and equipment, but does not compensate for the income the business loses while it cannot trade or is trading at reduced capacity during repairs and reinstatement. Business interruption cover addresses that separate financial loss, and a claim under it is normally only valid if there has also been a successful claim (or an event that would have triggered one) under the related property section of the policy.
The Indemnity Period
The indemnity period is the maximum length of time the policy will pay out for lost income and increased costs following an insured event, commonly offered in options such as 12, 24 or 36 months. Choosing too short a period is one of the most common mistakes businesses make, since full recovery of turnover after a serious loss — including rebuilding a customer base — can take considerably longer than the time needed simply to repair the physical damage.
Setting the Sum Insured
The sum insured should reflect the business's annual gross profit (or the relevant measure the policy uses) projected forward to account for expected growth over the indemnity period, since underinsuring can result in a claim being reduced proportionately under 'average' clauses even if the actual loss is within the stated sum insured. Regularly reviewing and updating the sum insured as the business grows is essential to avoid being underinsured at the point of a claim.
Gross Profit as the Basis of Cover
Most policies are written on a gross profit basis, defined in the policy as turnover less variable costs that would not be incurred if the business stopped trading (such as the cost of goods sold), so the sum insured broadly represents turnover minus these variable costs, plus any specified increased cost of working needed to keep trading, such as renting temporary premises.
Common Exclusions and Limitations
Policies typically exclude losses arising from events not covered by the underlying property section (such as gradual wear and tear or uninsured perils), losses caused by the insured business's own financial difficulties unrelated to the insured event, and losses beyond the chosen indemnity period. Many policies also set specific limits or require separate extensions for supply chain disruption, denial of access, or utility failures affecting the premises.
Notifiable Disease and Denial of Access Extensions
Following widespread disputes over Covid-19-related claims, many insurers now offer, or explicitly exclude, specific extensions covering notifiable disease outbreaks at or near the premises and denial of access caused by actions of a public authority, and it is worth checking exactly what is and is not covered under these extensions rather than assuming standard cover applies to non-physical-damage events.
Making a Claim
Following an insured event, a business should notify its insurer promptly, keep detailed financial records showing the impact on turnover and costs, and typically work with a loss adjuster who will assess both the underlying property damage claim and the resulting business interruption loss, often requiring management accounts, historical trading figures, and evidence of steps taken to minimise the loss (known as mitigation).