Business interruption claims can cost more than the damage itself
When a fire or flood hits a business, most people think first about the building and the equipment. But a recent claims study suggests the bigger bill often comes afterwards, from the time it takes to get back to normal.
In this article, we’ll explain what business interruption means, what the latest figures show, and why the length of your indemnity period matters.
What is business interruption insurance?
Business interruption (BI) insurance typically covers the loss of income, such as gross profit, and certain extra costs when an insured event stops you trading, depending on your policy. Property insurance usually pays to repair or replace the damaged building and contents. BI is designed to look after the business while that happens.
What the latest figures show
Allianz Commercial analysed 7,888 business interruption claims worth around €6.74 billion in total, made between January 2021 and December 2025. It found that:
- the average BI claim was over €850,000
- that’s about 70% more than the average property damage claim linked to the same events, which was close to €500,000
- fire and explosion accounted for over 40% of total claim value, and natural catastrophes for 34%
- everyday events such as fire, water damage and machinery breakdown made up 74% of claims by number and 66% by value
The figures are in euros and cover a wide dataset, so they won’t match every UK business. The pattern, though, is clear: the interruption can be costlier than the damage.
It also shows how ordinary the causes are. Most claims weren’t caused by rare, headline-grabbing disasters. They came from things like a fire in a unit, a burst pipe or a key machine breaking down, which is why it’s worth thinking about this even if your business has never had a big loss.
Why does the gap exist?
Putting a building back together is only part of the picture. After a serious loss you may have to wait for:
- specialist machinery with long lead times
- planning permission or surveys
- suppliers to restart
- customers to come back after you’ve been closed
During all that time, costs such as wages, rent and loan repayments usually carry on while sales don’t.
What is an indemnity period?
The indemnity period is how long your BI cover will pay out after an insured event, counted from the date of the damage. It’s set when you take out the policy, typically in months. If it’s too short, cover could end before your business has actually recovered.
Questions to ask yourself
- How long would it really take to rebuild or replace what we have? Include time for ordering equipment and getting permissions.
- How long would it take for sales to recover? Customers don’t always return the day you reopen.
- Are the figures right? Your sum insured should reflect current and expected gross profit, which can change as the business grows.
- Do we depend on key suppliers or customers? Some policies can be extended to cover disruption at their premises, depending on the wording.
- Do we have a plan? Knowing who to call and how to carry on trading from elsewhere can cut the time you’re out of action.
How L Wood can help
We can review your business interruption cover with you, check that your sums insured and indemnity period still match the way you operate, and explain any extensions that may be worth considering. We can also speak to insurers on your behalf and offer practical risk management advice to reduce the chance of a loss in the first place.
Talk to us
Reach out to L Wood Insurance Brokers to explore our tailored solutions. You can call us on 01274 515747 or email mail@lwood.co.uk, Monday to Friday, 8:30am to 5pm.