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BUSINESS INTERRUPTION INSURANCE THAT HELPS YOU STAY OPEN
Why Business Interruption Insurance Matters
When a loss happens, most businesses focus on the visible damage: a fire in a production area, flood water in the warehouse, a broken machine, or a theft of specialist equipment. But for manufacturing companies, the biggest financial hit is often what comes next: the interruption to trading.
Business Interruption (BI) and Loss of Income insurance is designed to protect your gross profit (or revenue for certain wordings), helping you pay wages, rent, finance costs and overheads while you recover. It can also fund extra expenses to keep production moving, protect customer contracts and reduce long-term damage to your business.
Business Interruption Cover for Electrical & Electronics Manufacturing
Electrical components manufacturing is a high-dependency environment. Your operation usually relies on a combination of: skilled labour, quality control processes, specialist machinery, and stable utilities (power, compressed air, cooling and extraction). If one link breaks, output can stop immediately.
This type of cover is particularly relevant to:
- Connector, cable, wiring harness & loom manufacturers
- PCB assembly, SMT production and electronics contract manufacturers
- Active component and semiconductor-adjacent operations
- Passive component manufacturing (capacitors, resistors, coils)
- Injection moulding and precision engineering supporting electrical parts
- Transformer, motor winding and coil manufacturing
- Test & inspection-heavy manufacturers supplying regulated sectors
- OEM and Tier supply chain businesses with just-in-time delivery obligations
If your customers are large OEMs or regulated industries, a short interruption can lead to disproportionate consequences: missed delivery slots, line-down exposure, and loss of preferred supplier status. BI insurance is designed to protect the business through the recovery period — not just the damaged asset.
What Does Business Interruption Insurance Cover?
Business interruption cover is usually triggered by insured damage at your premises — typically the same events insured under your property policy (for example fire, flood or storm, escape of water, and sometimes theft). Once the trigger applies, BI can cover the financial impact on your business during the “interruption period”.
Most policies are written on a gross profit basis (sales less variable costs) and can include:
- Loss of gross profit due to reduced turnover
- Increased cost of working (extra expense to reduce the loss)
- Standing charges and overheads (wages, rent, finance costs)
- Additional costs of outsourcing or temporary premises (where economical)
- Accountants’ fees for preparing claim calculations (often covered)
- Prevention of access / denial of access (wording dependent)
- Utilities interruption extensions (power, water, gas – if added)
- Loss of rent (if you have tenants / rental income)
BI doesn’t just “replace income”. It is designed to keep the business viable while it returns to normal trading. That’s why the right sum insured, the right indemnity period, and the right extensions make a major difference to whether the policy genuinely protects you in a serious loss.
The Two Biggest Decisions: Indemnity Period & Gross Profit Sum Insured
Most underinsurance problems come from two areas: (1) an indemnity period that is too short, or (2) a gross profit sum insured that is too low. Electrical manufacturing often requires longer recovery times than businesses expect — because equipment lead times, compliance testing, and customer approvals can extend the time needed to get back to full output.
Indemnity period: how long should it be?
The indemnity period is the maximum period the insurer will pay for BI losses after an insured event. Many businesses select 12 months by default, but in manufacturing this can be risky. Consider the full chain: securing the site, reinstating power and utilities, repairing or replacing equipment, re-hiring labour if needed, re-qualifying processes, and rebuilding customer confidence and order pipelines.
Typical indemnity periods for component manufacturers might be:
- 12 months – smaller operations with fast replacement and flexible production
- 18–24 months – common for equipment-dependent manufacturing with long lead items
- 24–36 months – higher-risk supply chain roles, single-site operations, specialised plant
Gross profit sum insured: the number that matters in a serious loss
The gross profit sum insured is not simply turnover. It is normally calculated as: turnover – uninsured working expenses (variable costs that stop when production stops), plus the portion of wages and overheads you want protected. If you get this wrong, the “average clause” can reduce claim payments even if the loss is valid.
We help you select an approach consistent with your accounts and insurer expectations, including a practical view of which costs truly stop during interruption versus those you still have to pay.
Manufacturing-Specific BI Risks (That Cause Long Recoveries)
Electrical component manufacturers face challenges that can extend interruption well beyond “repair the building”:
1) Long lead times on specialist machinery
Replacement machines (CNC, pick-and-place, reflow ovens, crimp presses, injection moulders, automated inspection systems) can have extended lead times — particularly if there are supply chain constraints, custom fixtures, or installation requirements.
2) Process re-qualification and customer approvals
For regulated sectors, you may need to re-validate processes, re-test batches, and obtain customer sign-off before resuming normal shipments. That “administrative recovery time” is often overlooked when choosing indemnity periods.
3) Work-in-progress and staged production
Interruption in one work centre can create backlog across multiple stages. Some WIP may be scrapped if interrupted mid-process. BI cover needs to consider how output ramps up rather than returning instantly to normal.
4) Supplier and utility dependencies
You may not control the biggest bottleneck. If a supplier suffers a fire, or power is interrupted, production can still stop. Extensions like suppliers/customers and utilities can be essential, depending on your operation.
5) Contract risk and customer concentration
A prolonged delay can trigger chargebacks, expedite penalties, and in extreme cases loss of contract. While BI doesn’t automatically pay contractual penalties, it can provide the cashflow needed to keep the business stable, fund accelerated recovery, and protect customer relationships.
Key BI Extensions for Electrical Components Manufacturers
The best BI policies are built around your real-world dependencies. Below are common extensions that can make a major difference to whether the policy responds in the scenarios that matter most.
Supply Chain & Dependency Extensions
- Suppliers extension – loss due to damage at key suppliers’ premises
- Customers extension – loss due to damage at key customer premises (wording dependent)
- Contract sites / third-party premises – if stock/WIP is stored or processed elsewhere
- Goods in transit interruption considerations (where insurable and relevant)
Operational Continuity Extensions
- Denial of access – restrictions after an incident near your site
- Utilities interruption – power, gas, water interruption impacting production
- Public authority – closure orders or safety restrictions (wording dependent)
- Increased cost of working – overtime, outsourcing, temporary premises
Many manufacturers benefit from a joined-up approach: property + BI + machinery breakdown + cyber. The goal is to avoid gaps where the building is insured but the interruption trigger is not, or the machine is insured but the loss of profit is not.
BI After Machinery Breakdown (Loss of Profits Following Breakdown)
Many production interruptions aren’t caused by fire or flood — they’re caused by a machine failing. Standard BI is usually tied to property damage events, so it may not respond to a purely internal breakdown. That’s where machinery breakdown business interruption (also called “LOP following breakdown”) can be critical.
For electronics and components manufacturers, this can be relevant when:
- A critical CNC, moulding press, SMT line or inspection system fails
- A compressor or chiller breakdown halts multiple lines
- Test equipment failure prevents product release and shipping
- Control systems, drives or PLCs fail causing extended downtime
We can structure cover so that both repair costs and the loss of gross profit are addressed — avoiding a scenario where the machine is repaired, but the cashflow loss is left uninsured.
The Real Cost of Interruption: What BI Helps Protect
A serious interruption is rarely “one cost”. It is a chain reaction that hits multiple parts of the business at once:
- Lost sales and margin due to reduced production capacity
- Wages and payroll that continue even when output slows
- Rent, rates, finance repayments and fixed overheads
- Expedited shipping, outsourcing and overtime to recover delays
- Additional QC/testing after an incident or restart
- Customer churn if they move supply to alternatives
- Reputational impact on preferred supplier status
BI cover is not about “making a profit from a claim”. It’s about protecting the business so it survives and returns to normal. That’s why careful design matters — including sensible policy triggers, accurate sums insured and realistic recovery timelines.
Why Choose Insure24?
- Manufacturing-focused advice – we understand downtime, lead times and supply chain pressure
- Help setting correct BI sums insured and indemnity periods
- Access to specialist markets for complex manufacturing risks
- Joined-up cover: property + BI + breakdown + cyber (where needed)
- FCA regulated brokerage with ongoing claims and renewal support
After an incident stopped production, the BI cover Insure24 arranged protected our cashflow and funded extra costs to keep customers supplied. It made the difference.
Finance Manager, UK Electronics ManufacturerHow to Arrange Business Interruption Insurance
BI cover is only as strong as the information provided. Insurers need to understand your production model, dependencies and financials. We help package your risk to secure broad cover and avoid avoidable disputes later.
- 1. Confirm your turnover, gross profit and key variable costs.
- 2. Choose an indemnity period based on realistic replacement and restart timelines.
- 3. Identify critical machinery, utilities and supply chain dependencies.
- 4. Select extensions (suppliers, utilities, denial of access) that match your exposures.
- 5. We approach suitable insurers and negotiate terms aligned to your contracts and operations.
FREQUENTLY ASKED QUESTIONS
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What is business interruption (BI) insurance?
Business interruption insurance is designed to protect your gross profit (and certain ongoing costs) when your business is disrupted by an insured event such as fire, flood or other property damage trigger. It can also cover extra expenses to reduce the loss and speed up recovery.
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What is “loss of income” insurance – is it the same as BI?
“Loss of income” is commonly used to describe business interruption cover. Many commercial policies calculate the claim using gross profit (turnover less variable costs). The aim is to protect the business’s financial performance during the recovery period.
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What triggers a BI claim?
Usually insured damage at your premises caused by a peril covered under your property policy (for example fire, flood, storm, escape of water). Some policies can add extensions for denial of access, suppliers, or utilities interruption, subject to wording.
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How do I choose the right indemnity period?
Choose an indemnity period based on realistic worst-case recovery time: reinstatement, replacement of long lead machinery, re-qualification/testing, and the time needed to rebuild output and order pipelines. Manufacturers often consider 18–24 months or longer if equipment lead times are significant.
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What happens if my gross profit sum insured is too low?
Underinsurance can reduce the claim payment through the “average” clause, meaning even a valid claim may be paid proportionately less. Setting sums insured accurately is one of the most important parts of arranging BI cover.
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Does BI cover supply chain disruption?
It can, if you add supplier/customer dependency extensions and the policy wording supports the scenario. Standard BI is usually tied to damage at your own premises, so dependency extensions are important where your operation relies on specific suppliers or third-party sites.
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Does BI cover interruptions caused by machinery breakdown?
Standard BI is normally triggered by property damage perils. For internal breakdown events, you may need machinery breakdown business interruption (loss of profits following breakdown). We can help structure cover to address both scenarios.
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How quickly can Insure24 arrange cover?
Straightforward risks can receive quick terms. For manufacturers with complex dependencies, supply chain extensions, or larger sums insured, allow 1–2 business days for full underwriting and negotiation once we have the required financial and operational details.