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BUSINESS INTERRUPTION COVER THAT KEEPS YOUR BUSINESS STABLE
Why Business Interruption Insurance Matters for Engineering & Manufacturing
Engineering and manufacturing businesses are exposed to a simple, high-impact truth: if production stops, income stops — but costs rarely do. Rent, rates, salaries, finance agreements, leased machinery, utilities standing charges and essential overheads continue even if your factory floor is silent. A fire, flood, major theft, machinery breakdown, or other insured event can interrupt operations for weeks or months, not days.
Business Interruption (BI) and Loss of Income insurance is designed to protect your financial position when the unexpected happens. Rather than just paying to repair property damage, BI cover focuses on the real business impact: lost turnover, reduced gross profit, and the additional costs required to keep trading while you recover.
Insure24 helps UK engineering manufacturers arrange the right BI structure — including realistic indemnity periods, accurate sums insured, and extensions that reflect modern supply chain dependencies, outsourced processing, and contracts with strict delivery requirements.
What Does Business Interruption & Loss of Income Insurance Cover?
Business interruption cover generally responds when an insured event causes physical damage at your premises (or sometimes at a specified supplier/customer site), resulting in interruption or interference with the business. The exact triggers and scope vary by policy, but the aim is consistent: to restore your business’s trading position as if the loss had not happened.
The most common basis is Gross Profit (covering loss of turnover and continuing expenses), but other bases exist — including Gross Revenue, Increased Cost of Working and specialist loss of rent models (useful if you own or sublet parts of your premises).
Core BI Cover
- Loss of gross profit following an insured interruption (loss of turnover, continuing costs, and profit element)
- Standing charges that continue during downtime (rent, rates, finance, key salaries, etc.)
- Increased cost of working to reduce the loss (outsourcing, overtime, temporary premises/equipment)
- Claims preparation costs (sometimes available) to support evidence and calculation
- Loss of rent (if you rent out part of the premises and cannot collect rent due to damage)
- Additional expenses linked to recovery and continuity (subject to policy terms)
Common Extensions for Manufacturers
- Supplier extension (damage at key suppliers disrupts your business)
- Customer extension (damage at key customers reduces your turnover)
- Denial of access (you can’t access premises due to insured damage nearby or authority action)
- Utilities / services (loss of power, gas, water affecting production)
- Machinery breakdown BI (downtime driven by breakdown, where packaged appropriately)
- Seasonal increase / peak period adjustments for high-revenue months
What Can Cause Business Interruption in Engineering & Manufacturing?
Business interruption isn’t only “big disasters.” Many events create significant downtime: minor fires that damage electrical infrastructure, small floods that contaminate production areas, or theft that removes essential components or tooling. Your BI insurance should reflect realistic operational risks.
Property Damage Events
- Fire, smoke and explosion damage affecting production areas
- Flooding, storm damage and escape of water
- Theft, attempted theft, malicious damage and vandalism
- Impact damage (vehicles, forklifts, loading bay incidents)
- Damage to tooling, stock, fixtures and site infrastructure
Operational & Dependency Events
- Machinery / equipment breakdown causing production stoppage
- Loss of utilities (power, gas, water) affecting plant operation
- Damage at a key supplier or subcontractor you rely on
- Damage at a key customer leading to cancelled or delayed orders
- Access restrictions (police cordon, nearby incident, authority action)
Bespoke Jobs & Contract Pressure
If you manufacture bespoke or one-off engineering projects, downtime can have a disproportionate impact. A delayed delivery can trigger contractual penalties, cancellation, or client loss. Proper BI cover helps protect cashflow while you recover — and increased cost of working options help you spend money to save money (for example, outsourcing critical processes to meet delivery dates).
Choosing the Right Indemnity Period (The Most Common BI Mistake)
The indemnity period is the maximum time the policy will pay for your loss after an insured event. Many businesses choose 12 months by default, but engineering and manufacturing risks often require 18, 24 or 36 months depending on rebuild lead times, replacement machinery procurement, planning permission, specialist installation, revalidation, and how quickly customers return.
Choosing too short an indemnity period can create a dangerous gap: the business is still recovering, but the insurance stops paying. We help you select an indemnity period aligned to worst-case recovery timelines — not best-case.
What Drives Longer Recovery Times?
- Long lead times for specialist machinery and parts
- Electrical infrastructure replacement (switchgear, transformers)
- Building repairs and compliance sign-off (H&S, fire, environmental)
- Commissioning, testing and calibration of equipment
- Recruitment and retraining following disruption
- Time to regain production capacity and customer confidence
Getting the Sum Insured Right
BI sums insured are not guesswork. Underinsurance can reduce claims settlement via “average” clauses. Typically, we calculate:
- Annual turnover projection (including growth)
- Gross profit rate (turnover less uninsured working expenses)
- Standing charges you must keep paying
- Selected indemnity period (12/18/24/36 months)
- Seasonal/peak uplifts and backlog considerations
We’ll guide you through the information needed and help set figures that stand up in a claim.
How to Reduce BI Risk (And Improve Insurance Terms)
Insurers reward resilience. Strong risk management helps reduce premium, improve terms, and most importantly reduces the duration of downtime after a loss.
Continuity Planning
- Identify single points of failure in production lines
- Maintain critical spares strategy for key machines
- Outsource agreements / overflow capacity plans
- Documented business continuity plan with named roles
- IT/OT resilience where manufacturing relies on automation
Fire & Site Risk Controls
- Good housekeeping and dust/fume extraction maintenance
- Electrical inspections and thermal imaging programmes
- Hot works controls and permit systems
- Sprinklers / alarms / CCTV and intruder protection
- Segregation of high-risk processes and storage
Why Choose Insure24 for Manufacturing Business Interruption Insurance?
- Engineering-focused advice: We understand production processes, lead times and real recovery timelines.
- Correct BI design: Help selecting indemnity period, basis of cover and correct sums insured.
- Extensions that matter: Supplier/customer dependencies, denial of access, utilities and breakdown-related BI.
- Claims-ready structure: Clear documentation and guidance to avoid underinsurance problems.
- Fast support: Practical, commercial guidance when you need decisions quickly.
FREQUENTLY ASKED QUESTIONS
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What is business interruption insurance?
Business interruption insurance covers loss of income (often measured as gross profit) and certain additional costs when an insured event disrupts your ability to trade. It’s designed to put you back in the financial position you would have been in if the loss had not occurred.
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Does BI cover machinery breakdown?
It can, if your policy includes the appropriate extension or is packaged with machinery/equipment breakdown cover. Some BI policies respond mainly to property damage perils, so it’s important to structure the cover correctly for manufacturers.
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How long should my indemnity period be?
It depends on your recovery timeline. Many manufacturers need 18–24 months (sometimes longer) due to building works, specialist machinery lead times, commissioning and time to rebuild trading levels. Choosing too short a period is a common and costly mistake.
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What is “increased cost of working”?
Increased cost of working is cover for extra costs you incur to keep trading or reduce the impact of interruption, such as outsourcing, overtime, temporary equipment or alternative premises, provided the spend is economical relative to the loss avoided.
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How do I calculate the correct BI sum insured?
BI sums insured are usually based on projected turnover and gross profit rate, adjusted for growth, seasonality, and the indemnity period selected. Underinsurance can reduce claim settlement, so it’s important to use realistic projections and the correct basis of cover.
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Can BI cover losses caused by a supplier disruption?
Often yes, with supplier/customer extensions (sometimes called contingent business interruption). These cover losses where insured damage occurs at named or unspecified suppliers/customers, disrupting your operations.