When fire, flood or a break-in stops your business trading, the repair bill is only part of the cost. The money you lose while you cannot operate can be far bigger. That is what business interruption insurance claim cover is meant to replace. In this guide we explain what it covers, how to make a claim and the mistakes that cost businesses money.
At Sabre Assessing we act only for policyholders, never for insurers, and we help business owners put these claims together every year.
What is business interruption insurance?
Business interruption insurance pays for the income you lose and the extra costs you face when an insured event, such as a fire or flood, damages your premises and disrupts trading. It is normally an extension to a commercial property policy rather than a separate product.
It typically covers loss of gross profit, ongoing fixed costs such as rent and wages, and the extra costs of keeping the business running, for example temporary premises or hired equipment. The cover only responds to an event the policy insures, and the details vary between insurers.
What can a business interruption claim include?
- Lost gross profit. Turnover you would have earned, less the costs that stop when you stop trading.
- Increased cost of working. Temporary premises, rented plant, overtime and other extra costs of limiting the loss.
- Standing charges. Rent, rates, wages and other fixed costs that carry on regardless.
- Accountants’ fees. Some policies pay for the professional help needed to prepare the claim.
How to make a business interruption claim, step by step
- Tell your insurer straight away. Late notice can cause problems, so report the event as soon as it is safe to do so.
- Protect your property and limit the loss. Take sensible steps to prevent further damage, and keep every receipt.
- Record everything. Photograph the damage and note dates, times and who you spoke to.
- Gather your financial records. Management accounts, sales ledgers, VAT returns and recent trading figures are central to the claim.
- Build a clear forecast. Show what you would have earned had the incident not happened, with a sensible basis for every figure.
- Submit the claim and keep it updated. Claims usually run over months. Submit updated figures as trading recovers.
The same principles apply to the property side of the claim. Our guide on how to speed up a commercial property insurance claim sets out how to keep the damage claim moving at the same time.
Common mistakes that reduce a payout
- Underestimating the indemnity period. If your policy only covers 12 months and recovery takes longer, the shortfall is yours.
- Weak financial evidence. Insurers will test your figures, so gaps in the records slow things down.
- Accepting an early offer. A quick figure may not reflect the true length of the disruption.
- Not mitigating the loss. Insurers expect you to take reasonable steps to keep trading.
How long does a business interruption claim take?
It depends on the scale of the loss and how long the business takes to recover. Interim payments on account are often possible while the claim develops, so it is worth asking for them early. Ongoing costs can add up quickly, and cash flow matters.
Is it worth using a loss assessor?
These claims combine property damage and detailed financial calculations, which is where many business owners feel out of their depth. A loss assessor prepares the claim, presents the figures and deals with the insurer so you can focus on getting back to work. For more on the difference between the roles, see our guide on loss assessor vs loss adjuster.
Frequently asked questions
Does business interruption insurance cover a pandemic or power cut?
Only if your policy says so. Always check the wording, because many policies exclude or limit these events.
What if my policy has no business interruption cover?
Then the lost income is not insured. A loss assessor can still help with the property damage part of the claim.
Can I claim for lost customers after I reopen?
Many policies allow a period after reopening to cover the recovery. Check the extension in your policy.
Do I pay tax on a business interruption payout?
Payments that replace taxable profit are usually taxable, so speak to your accountant.
Get Help With Your Business Claim From Sabre Assessing
If your business has been hit and you are not sure what you can claim, call us on 0330 165 3545 or contact Sabre Assessing. We will look at your policy and explain your options.