When a fire, flood or burst pipe hits a business, there are really two losses. The first is the physical damage to the building, the stock and the equipment. The second is the trading you lose while the premises are out of action, and for many businesses that second loss ends up bigger than the first.
Business interruption cover exists for that second loss. It is also one of the most involved types of claim to put together, because it asks a hard question: what would this business have earned if the damage had never happened? This guide covers what business interruption cover is usually for, the first steps to take, and the records that make a claim hold up.
What business interruption cover is for
Business interruption cover is usually part of a commercial property insurance policy rather than a separate product. Its purpose is to cover the financial impact of not being able to trade normally after an insured event. Every policy is worded differently, but the losses it commonly deals with include:
- Lost revenue. The income a business loses while it cannot operate at full capacity, measured against how it was trading before the incident.
- Increased cost of working. The extra money spent to keep the business running, such as temporary premises, equipment hire, overtime and outsourcing.
- Loss of rent. For landlords, or businesses that sublet space, the rental income lost while the property is repaired.
- Claim preparation costs. Some policies cover accountants' and surveyors' fees needed to prepare and back up the claim.
Your policy schedule and wording decide what applies to you, so they are the first things to read, ideally before you ever need them.
Why the property damage claim usually comes first
Business interruption cover usually responds to interruption caused by damage the policy covers. In practice, that ties the two claims closely together. If the insurer accepts the fire, flood or escape of water, the interruption claim follows from it. If the damage claim is disputed or delayed, the interruption claim is held up too.
That is why it pays to get the property side right from day one: the cause established, the damage properly recorded and repairs moving. Our fire damage, flood damage and burst pipes pages cover how those claims work.
Check your indemnity period
Most business interruption policies limit how long the lost income is covered, often called the indemnity period. It is worth finding out early how long yours is and how your policy measures it.
That matters because recovery rarely stops when the builders leave. Stock has to be rebuilt, equipment replaced, staff brought back and customers won back. A realistic view of how long the business will take to recover, set against the period your policy covers, shapes the whole claim.
First steps after damage at your business
The first few days set the tone for everything that follows. As far as it is safe to do so:
- Contact your insurer as soon as you reasonably can. Have your policy details to hand. If you arranged cover through a broker, involve them too.
- Make the premises safe. Do what is needed to prevent further damage, and speak to your insurer before starting any work where you can.
- Photograph and film everything before anything is moved, cleared or thrown away.
- Keep damaged stock and equipment until the insurer has had the chance to see it, unless it is a health hazard.
- Keep every receipt and invoice for emergency work, temporary arrangements and extra costs, itemised where possible.
- Start a record of what happened, with dates, and keep it going as the business recovers.
The records that support a business interruption claim
A business interruption claim is built on evidence of how the business was trading before the incident, and what changed afterwards. The records that usually help include:
- Financial records such as management accounts, sales records, bank statements and VAT returns
- Trading patterns that show seasonal peaks, recent growth or new contracts
- Payroll records, including any overtime linked to the incident
- Invoices for extra costs, from temporary premises to equipment hire
- Evidence of lost business, such as cancelled orders, bookings or contracts
- Correspondence with customers, suppliers and the insurer
The Financial Ombudsman Service's own advice to businesses is simple: keep records of what has happened, and gather evidence of any losses. The businesses that do this from the start are in a far stronger position later.
Why business interruption claims get complicated
Working out what a business would have earned is not straightforward. Seasonal trade, growth plans, a new contract that was about to start, or a quiet spell that was about to end can all change the answer. Several types of loss often run side by side too: stock, plant and machinery, rent and the building itself.
It is also worth remembering who the insurer's loss adjuster works for. They are appointed by the insurance company to assess the claim on its behalf. Our page on loss assessors vs loss adjusters explains the difference.
How Home Claims Assist helps businesses
We act for policyholders, not insurers. For businesses, that means managing commercial property damage claims and business interruption claims from start to finish: preparing the claim, gathering and presenting the evidence, and dealing with the insurer's loss adjuster on your behalf, so you can concentrate on keeping the business going.
Our work covers the full picture, including property damage, stock losses, lost revenue, increased cost of working, loss of rent, and plant and machinery. You can read more on our business owners and landlords pages, or see how our process works.
If damage has disrupted your business and you need help with the claim, get in touch.
This article is general information about how home insurance claims work in the UK. It is not advice on your individual claim, which will turn on your own policy wording and circumstances. For advice on your situation, speak to our team.
