Business Interruption Insurance Calculator

How much business interruption cover do I need?

Business interruption (BI) insurance replaces the profit you lose and pays your ongoing bills if an insured event – a fire, flood or burst pipe – forces you to stop or slow trading. The figure you insure is called the sum insured, and getting it wrong is the single most common mistake: too low and the average clause cuts every claim; too high and you overpay on premiums. This calculator works out a realistic sum insured from your insurable gross profit and your chosen indemnity period, shows the gross profit you would lose each month you are shut, and warns you about under-insurance. It is built for UK sole traders, limited companies and shops that want a defensible cover figure before requesting quotes. It does not give a premium price; the numbers are for planning only.

How it works

The calculation has three parts:

• Insurable gross profit = annual turnover − uninsured working expenses. For insurance, gross profit is not your accounting gross profit – it is turnover minus only the variable costs that stop when you stop trading (stock purchases, carriage, packaging, bad debts). Wages and fixed overheads stay in because they carry on during a shutdown.
• Indemnity period is how long the policy keeps paying while you recover – 12, 18, 24 or 36 months. Because most businesses take well over a year to fully bounce back, the sum insured is your gross profit multiplied by the number of years in the indemnity period.
• Sum insured = insurable gross profit × indemnity period (in years), plus any additional increased cost of working you want to add for keeping the business running from temporary premises.

Worked example

A café turns over £300,000 a year. Its uninsured working expenses – food and drink stock, packaging and carriage – come to £120,000. That leaves an insurable gross profit of £180,000 (a 60% margin), or £15,000 a month at risk. Choosing a 24-month indemnity period gives a sum insured of £180,000 × 2 = £360,000. If the owner instead insured only £288,000 (80% of the true figure), the average clause would mean a £100,000 loss is paid at just £80,000 – a £20,000 shortfall exactly when the money is needed most.

What business interruption insurance covers – and what it doesn’t

BI cover is almost always an add-on to a commercial property or combined policy rather than a standalone product, and it only pays out when the loss is triggered by an insured physical event. Knowing where the lines fall stops you buying the wrong sum insured – or the wrong policy.

• Usually covered (after insured damage such as fire, flood, storm or a burst pipe): lost gross profit, ongoing fixed costs like rent, business rates and staff wages, the increased cost of working from temporary premises, and often loss of rent. Extensions can add damage at a supplier’s or customer’s site and denial of access caused by nearby damage.
• Usually excluded: pandemics and notifiable diseases (tightened across the market after the 2020–21 COVID-19 test cases), any loss with no physical damage, interruption from a cyber attack (that needs a separate cyber policy), and anything the underlying property section does not itself cover.

Because the trigger is physical damage, the size of your sum insured only matters once a valid claim is accepted – so it is worth setting it against your true gross profit and reviewing it every renewal as turnover changes.

Frequently asked questions

How is the business interruption sum insured calculated?

The sum insured is your insurable gross profit multiplied by the indemnity period. If your insurable gross profit is £180,000 a year and you choose a 24-month indemnity period, the sum insured is £180,000 × 2 = £360,000. Choosing an indemnity period longer than 12 months is why the figure can exceed one year of profit.

What counts as gross profit for business interruption insurance?

Insurance gross profit is not the same as accounting gross profit. It is your turnover minus your uninsured working expenses – the variable costs that stop when trading stops, such as stock purchases, carriage, packaging and bad debts. Wages and fixed overheads are usually left in because they carry on during a shutdown.

What indemnity period should I choose?

The indemnity period is how long the policy pays out while you recover. A 12-month period is the minimum, but most brokers recommend 18, 24 or 36 months because rebuilding premises, replacing equipment and winning back lost customers usually takes far longer than a year.

What is the average clause and under-insurance?

Business interruption policies contain an average (under-insurance) clause. If your declared sum insured is lower than your actual gross profit at the time of a claim, the insurer reduces the payout by the same proportion. Insuring 80% of the true figure can mean only 80% of your loss is paid.

Does business interruption insurance cover staff wages?

Yes, in most policies wages and salaries are included within the gross profit definition, so they are covered while you keep staff on during a shutdown. Some businesses insure payroll separately on a dual-basis; check your policy wording so wages are not accidentally excluded.

Does business interruption insurance cover pandemics?

Most standard policies now exclude losses from notifiable diseases and pandemics after the COVID-19 test cases. Cover is usually triggered by physical damage such as fire, flood or a burst pipe. Always read the exclusions and, if you need disease or denial-of-access cover, ask your broker for an extension.

Source: gross profit and indemnity-period conventions follow standard UK business interruption (declaration-linked) policy wording; see the Association of British Insurers (ABI) – Business Interruption Insurance guidance. The average (under-insurance) clause is a standard feature of UK commercial policies.