Business Interruption Insurance Calculator UK

How to calculate your business interruption sum insured

Take annual turnover, subtract purely variable costs — purchases, carriage, packaging and sub-contract labour that stops when trading stops — to reach insurable gross profit. Multiply that by the indemnity period in years, then add an allowance for growth and inflation across the period. A business with £750,000 turnover and £300,000 of variable costs on a 24-month period needs roughly £945,000 of cover at 5 per cent growth.

Why insurance gross profit is not accounting gross profit

Accountants deduct all cost of sales including wages. Insurers deduct only costs that genuinely fall away when trading stops. Rent, salaries and finance payments continue after a fire, so they must stay inside the sum insured. Using the accountant's figure is the single most common cause of underinsurance in UK commercial policies, and most wordings apply an average clause that reduces the settlement proportionately.

Choosing an indemnity period

• Office or professional services — 12 to 18 months
• Retail shop — 18 months
• Restaurant or takeaway — 18 to 24 months
• Warehouse or distribution — 24 months
• Manufacturing — 24 to 36 months
• Listed or specialist premises — 36 months

Read more on underinsurance and the real cost, or call 020 8908 2426 to have a broker check your figures before renewal.