The fire is not what closes a business. The eight months afterwards is.
Property insurance rebuilds the building. It does not pay the rent, the wages, the loan payments or the income you lose while you cannot trade. This is the cover most often set too low, and the one most often blamed afterwards.
Have my cover checked How it is calculatedIncome lost and costs that continue while you cannot trade
Any business that stops earning when its premises are unusable
Your policy schedule and recent financial statements
What is business interruption insurance?
It replaces the income your business loses after an insured event stops you trading, and pays the costs that continue anyway, rent, salaries, loan payments and the extra expense of working from somewhere else. It only responds when there has been physical damage covered by your property policy. The amount and the length of time it pays for are both chosen by you, which is exactly why it goes wrong so often.
If the indemnity period runs out while you are still rebuilding, the payments stop. The rent, the wages and the loan repayments do not, and that gap is usually what closes a business rather than the fire itself.
Get these wrong and the rest does not matter.
The sum insured
Usually based on gross profit rather than turnover, sales less the costs that stop when you do. Insuring turnover overpays. Insuring net profit badly underpays.
The indemnity period
How many months it keeps paying. Twelve is the common default and it is frequently too short: demolition, permits, rebuilding, re-equipping and winning customers back all take longer than people assume.
Extra expense
The cost of trading from a temporary site, renting equipment or paying overtime to catch up. Often the difference between surviving and not.
Payroll
Whether you keep paying staff while closed, and for how long. Losing your trained people is how a recoverable loss becomes permanent.
Contingent business interruption
When it is your supplier or your biggest customer who burns down, not you. Not automatic, and increasingly relevant.
Denial of access
Damage next door, or an emergency closure of your block, that stops customers reaching you even though your premises are untouched.
How long would it really take?
Work through this honestly and you will usually find your indemnity period is short. These are the stages people forget when they pick twelve months.
Before rebuilding starts
Investigation, adjusting, demolition, drawings and permits. Months before a single wall goes up.
The slowest machine
Specialist equipment on a long lead time decides your schedule, not the building work.
Getting customers back
Trade does not resume at full volume on reopening day. That ramp is part of the loss too.
This is where cheap policies hide.
Two quotes can look identical and behave completely differently.
The quickest way to make a commercial quote cheaper is to shorten the indemnity period or shave the sum insured. Nothing on the summary page looks wrong. The difference only appears in the year after a fire, when the payments stop while you are still rebuilding.
So when we quote, we will show you the indemnity period and the basis of the sum insured before the premium. If a competitor’s price is lower, ask them for those two numbers and compare those instead.
A situation we see.
A fire closes a bakery in March. The rebuild finishes in November. Property paid for the ovens; business interruption paid the eleven months of rent, wages and lost margin. Only one of those two is optional, and it is the one people drop.
What business owners ask us.
How much business interruption cover do I need?
Base the amount on gross profit rather than turnover, and the length on how long it would genuinely take to be trading normally, including permits, rebuilding, equipment lead times and winning customers back. That length is the indemnity period and it drives everything.
Does business interruption cover a pandemic or a government closure?
Generally no. Standard cover responds to physical damage at your premises. Closures without physical damage are usually excluded, and that wording became much clearer across the market after 2020.
What if my supplier burns down and I cannot operate?
That needs contingent business interruption, which is a separate extension. It is not included by default and it matters most to businesses with one dominant supplier or customer.
Is twelve months long enough?
Often not. For anything involving specialist equipment, a custom building or a licensed premises, eighteen or twenty-four months is frequently more realistic.
What is extra expense cover?
It pays the additional costs of keeping going, a temporary location, rented equipment, overtime. Some businesses need more of this than income replacement, because staying open is what protects the customer base.
Do I still pay staff while closed?
You decide, and the policy should reflect the decision. Insuring payroll for a period is usually cheaper than recruiting and retraining an entire team afterwards.
How long could you survive not trading?
If you do not know, that is the number to work out. Send us your policy and your figures.