17 April 2026 
Business Interruption (BI) insurance provides cover when an incident interrupts the normal running of your business. These interruptions can cause a loss of revenue, due to a reduction in sales, as well as increased running costs. The BI insurance covers these losses in the aftermath of the incident, if required, till the end of the indemnity period. There are two main types of Business Interruption cover:
Loss of Gross Profit
Gross profit = Net sales – Cost of goods sold.
This is the most common form of Business Interruption cover. Typically, this type of insurance is more suitable for businesses with many variable costs, such as those in the retail and manufacturing sectors. These policies cover the loss of net profit following standing charges, a reduction in turnover and an increased cost of working. Loss of gross profit also allows for the deduction of variable costs, or uninsured working expenses, ensuring that your business does not need to insure costs that will cease in the event of a loss. As these variable costs are not covered by the policy, often insurance premiums are lower. Importantly, variable costs can be difficult to correctly identify. It is sometimes tricky for a business to know what costs should be covered by their policy. This leaves the business more at risk of being underinsured.
Underinsurance
Underinsurance occurs when a business does not have enough insurance cover to meet their needs and can result in penalties being applied to the business. This can cause significant problems during a claim, such as the claimant receiving a payment that does not cover the cost of returning to a pre-loss state. In extreme or deliberate cases, the insurer may even have the right to void a policy. Underinsurance is a common problem, with The Chartered Institute of Loss Adjusters estimating that 40% of claims have underinsurance present.
Loss of Gross Revenue
Loss of gross revenue covers reduction in turnover following a loss, and any increased cost of working. Significantly, this type of insurance does not consider any deductions, except savings due to the loss. To calculate gross revenue, a business simply needs to know its total turnover over the indemnity period. A loss of gross revenue policy does not require variable cost calculations and, as such, is less likely to result in underinsurance. This type of cover is, usually, suitable for businesses with few variable costs. Gross revenue is also easier to calculate than gross profit, often making these policies simpler and more straightforward.
Partial Loss
In the event that your business has to close fully due to an incident, it is likely that, particularly in the retail and manufacturing sectors, your raw material, packaging etc. costs will drop to zero. As such, these costs would be valid Uninsured Working Expenses. However, if your business only closes partially, then these costs may decrease, but they will not reduce to nothing. In that case, they would not be valid UWE’s and so should be covered by your policy.
Indemnity Period
An indemnity period is the length of time that your insurer will pay a business interruption claim, following the loss of profits due to an incident. It is important to find the right indemnity period for your business, as setting too short an indemnity period could result in underinsurance. The length of your indemnity period will depend on your individual business, as well as the industry you are in. It is important to remember that although your business may be reopened, profit/revenue levels may not return to pre-loss levels immediately. Customers may decide to go elsewhere whilst you are closed, or your supply chain could be disrupted, so it is important to build contingencies into your indemnity period.