My Account
Business Interruption Insurance for Caravan Parks Explained
Introduction: why caravan parks are vulnerable to interruptions
Caravan parks and holiday parks are seasonal, cash-flow sensitive businesses. A bad week in peak season can wipe out a big chunk of annual profit. Even when you do everything right, events outside your control can force you to close, restrict trading, or reduce occupancy.
That’s where business interruption (BI) insurance comes in. It’s designed to protect your income when your park can’t trade as normal following an insured event.
This guide explains BI insurance in plain English: what it is, what it typically covers for caravan parks, the pitfalls to avoid, and the questions to ask before you buy.
What is business interruption insurance?
Business interruption insurance (sometimes called loss of profits cover) is usually an add-on to a commercial property or commercial combined policy.
It does not pay for the physical damage itself (that’s the job of your property section). Instead, BI helps cover the financial impact of an interruption — for example, lost profit from pitch fees, reduced shop takings, or ongoing costs you still have to pay while closed.
Most BI cover is triggered by insured damage at your premises (for example, a fire in the reception building). Some policies can also include extensions for events that don’t involve damage, such as denial of access.
What BI insurance can cover for caravan parks
Cover varies by insurer, but BI for caravan parks commonly includes:
- Loss of gross profit (or loss of revenue): the profit you would have earned if the interruption hadn’t happened
- Increased cost of working (ICOW): extra costs to keep trading or reduce the loss (for example, temporary facilities)
- Standing charges / fixed costs: costs that continue even when income drops (for example, certain wages, loan repayments, utilities, business rates)
- Accountants’ fees: costs of preparing claim documentation
Examples of caravan park income that may be affected
Depending on how your business is set up, BI may need to reflect multiple income streams:
- Pitch fees (touring and seasonal)
- Static caravan hire income
- Sales commissions (if you sell caravans on-site)
- Shop, café, bar, or restaurant takings
- Entertainment income
- Laundry and ancillary services
- Storage fees
A good BI setup starts with a clear picture of how your park makes money across the year.
Common BI claim scenarios for caravan parks
Here are realistic examples where BI may come into play (subject to policy terms and insured perils):
1) Fire or explosion affecting key buildings
A fire in reception, the shop, or a plant room can stop check-ins, close amenities, or make the park unsafe. Even if pitches are intact, you may lose bookings and face cancellations.
2) Storm damage and flooding
UK caravan parks are often exposed to wind, coastal weather, and heavy rainfall. Storm damage to buildings, roads, drainage, or electrical infrastructure can lead to partial or full closure.
3) Escape of water or damage to services
A burst pipe in a shower block, or damage to electrical systems, can make facilities unusable. If you can’t provide basic amenities, you may have to close or restrict occupancy.
4) Damage to access routes or essential infrastructure
If an insured event damages internal roads, bridges, gates, or key access points, you may be unable to admit guests safely.
5) Loss of bookings after an insured event
Even after repairs, you may face a “tail” of reduced occupancy due to reputational impact or delayed reopening. Some BI covers allow for this through an appropriate indemnity period.
BI insurance is about time: understanding the indemnity period
One of the most important BI decisions is the indemnity period — the maximum time the insurer will pay for loss following an insured event.
For caravan parks, short indemnity periods can be risky because:
- Repairs can take longer than expected (planning, contractors, supply chain)
- Peak season losses are concentrated
- You may need time to rebuild bookings after reopening
Common indemnity periods are 12, 18, 24, or 36 months. Many parks choose 18–24 months where budgets allow, especially if key facilities (pool, clubhouse, reception) would be difficult to replace quickly.
Gross profit vs revenue: which basis is right?
BI is often arranged on a gross profit basis. This is not the same as “gross profit” on a simple sales report. Insurers use a specific BI definition that typically includes:
- Turnover (or revenue) less uninsured variable costs
- Plus insured standing charges
If you insure on the wrong basis, you can end up underinsured even if the policy looks “big enough” on paper.
If your park has multiple income streams and seasonal peaks, it’s worth working with your broker and accountant to ensure the BI calculation matches how you actually trade.
Increased Cost of Working (ICOW): keeping the park trading
ICOW can be one of the most valuable parts of BI for caravan parks, because it can fund practical workarounds.
Examples might include:
- Hiring temporary toilet/shower units
- Renting portable office space for reception
- Paying for additional marketing to rebuild occupancy after reopening
- Using alternative suppliers or emergency repairs to reduce downtime
Most policies only pay ICOW if it is economical, meaning the cost is proportionate to the loss it prevents.
Key BI extensions caravan parks should consider
Not every interruption is caused by direct damage to your own buildings. Depending on your risk profile, ask about these common extensions:
Denial of access / prevention of access
If guests cannot access the park due to an insured event nearby (for example, emergency services cordon), this extension may help.
Public utilities / failure of supply
Loss of electricity, water, or gas can shut down facilities. Some policies cover BI caused by damage to utility infrastructure away from your premises (often within a specified radius).
Disease / notifiable disease
Some policies include limited cover for closures linked to certain diseases. Wordings vary widely, and cover may be restricted.
Suppliers and customers
If you rely on a key supplier (for example, a single laundry provider or a key food supplier for on-site hospitality), contingent BI may be relevant.
Loss of attraction / non-damage events
For parks that depend on nearby attractions or events, there may be specialist covers available. These are not standard and need careful review.
Common exclusions and limitations to watch
BI claims often fail or are reduced because of exclusions, sub-limits, or conditions. Common pitfalls include:
- No insured damage trigger: many BI covers only respond if there is insured physical damage
- Underinsurance / average: if your BI sum insured is too low, the insurer may reduce the payout proportionally
- Short indemnity period: the claim stops before you’re back to normal trading
- Flood exclusions or high excesses: particularly relevant for parks near rivers or coastlines
- Wear and tear / maintenance issues: gradual deterioration is usually excluded
- Cyber events: BI from cyber incidents may require separate cyber cover
- Seasonality not reflected: sums insured based on “average months” can be inadequate for peak season exposure
How to set the right BI sum insured for a caravan park
A practical approach is:
- Map your income streams (pitches, hire, shop, bar, etc.)
- Identify peak season exposure (what would you lose if you missed 6–10 weeks of summer?)
- List standing charges you’d still pay while closed
- Choose an indemnity period that reflects realistic rebuild and booking recovery time
- Allow for growth if bookings and prices are rising
If you’re expanding facilities (new shower block, new bar, more pitches), update BI figures straight away.
Claims process: what insurers usually expect
If you need to claim, insurers typically want:
- Financial records (management accounts, VAT returns, booking reports)
- Evidence of the insured event and repair timeline
- Proof of additional costs (invoices for temporary units, contractors, marketing)
- A clear calculation of loss of gross profit
Good record-keeping makes a big difference. If you use booking software, keep exports and reports that show occupancy and cancellations.
Risk management tips that can reduce BI exposure
Insurers like well-run parks, and practical risk management can reduce both claims and premiums:
- Maintain electrical systems, gas safety checks, and fire risk assessments
- Keep drainage and flood defences maintained
- Have contractor relationships in place for emergency repairs
- Create a continuity plan for peak season incidents
- Back up booking data and have a manual check-in process
Even a simple “what do we do if reception is unusable tomorrow?” plan can save days.
FAQs: Business interruption insurance for caravan parks
Is BI insurance the same as property insurance?
No. Property insurance pays to repair or replace damaged buildings and contents. BI insurance covers the financial losses caused by the interruption after an insured event.
Will BI cover lost bookings if we have to close?
Often yes, but usually only if the closure is due to an insured event and the policy trigger is met. The wording and extensions matter.
What indemnity period should a caravan park choose?
Many parks consider 18–24 months, but it depends on how complex your facilities are and how quickly you could rebuild and restore occupancy.
Does BI cover seasonal parks differently?
It can, but you must set sums insured and indemnity periods with seasonality in mind. Underinsurance is a common issue when peaks aren’t reflected.
Can BI cover interruptions caused by power cuts?
Sometimes, via a utilities extension, usually with limits and conditions. Ask what is covered and whether it requires damage to utility infrastructure.
Next steps: get BI cover that matches how your park trades
Business interruption insurance can be the difference between a temporary setback and a long-term financial problem. The key is making sure the cover reflects your real trading pattern, peak season exposure, and the time it would take to recover.
If you’d like, tell me:
- Whether your park is seasonal or year-round
- Your main income streams (pitches, static hire, shop/bar)
- Any key facilities (pool, clubhouse, entertainment)
…and I’ll help you shape a policy checklist and a short brief you can send to insurers for accurate quotes.