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BUSINESS INTERRUPTION & LOSS OF INCOME INSURANCE
Why Business Interruption Matters for Equipment Manufacturers
For industrial equipment manufacturers, the most damaging part of a major incident is often not the physical loss — it’s the time. A serious fire, flood, escape of water, storm damage or large theft can stop production immediately, trigger missed delivery dates, and create pressure from customers, lenders and suppliers. Meanwhile, wages, leases, finance, rent and overheads continue.
Business interruption (BI) insurance is designed to protect your trading results during that disruption — typically covering loss of gross profit and certain additional costs you incur to keep trading or to speed up recovery. The key is structuring BI around manufacturing reality: long-lead machinery, specialist tooling, planning/approvals, test/commissioning time, and supply chain constraints.
Insure24 helps you model realistic downtime and build a BI section that matches how your factory actually recovers, so you’re less likely to be caught out by short indemnity periods, inadequate gross profit sums insured, or hidden policy conditions (subject to underwriting and policy terms).
How BI Claims Typically Happen in Manufacturing
BI is usually triggered by insured physical damage (for example, a fire or flood) at your premises. Once the damage occurs, the claim focuses on the period you are disrupted and the financial impact: reduced turnover, lost contribution, unavoidable costs, and reasonable extra expenses to reduce the loss.
Manufacturing BI claims can be complex because “output” depends on machines, people, materials, utilities, test capacity and delivery slots — not just a simple retail footfall model.
- Fire / Smoke – Damage, contamination and clean-up time; capacity is lost while reinstatement happens.
- Flood / Escape of Water – Electrical systems, CNC/plant, stock and WIP damaged; drying and testing delays.
- Storm / Roof Damage – Water ingress; partial shutdown; temporary works needed to keep operating.
- Machinery Breakdown Leading to Damage – Secondary fire/physical damage triggers BI under property (wording dependent).
- Supply Chain Disruption – Where dependent supplier/customer extensions are in place (policy dependent).
- Utilities Failure – Sometimes insurable with specific extensions; often a key exposure for manufacturers.
What Business Interruption Insurance Can Cover
BI sections vary widely by insurer and wording. The structure usually sits alongside your property cover and responds after an insured loss. The aim is to protect profit and fund recovery actions that reduce downtime.
We help you compare BI wordings so you can see what triggers cover, what is excluded, and what evidence/conditions you must satisfy during a claim.
- Loss of Gross Profit – Reduction in turnover and/or increased cost impacts on profit (calculation is wording dependent).
- Increased Cost of Working – Overtime, outsourcing, hire equipment, temporary premises, expedited shipping.
- Specified Working Expenses – Certain continuing costs can be treated differently depending on how BI is structured.
- Claims Preparation Costs – Accountant support to evidence loss (where provided for by the wording).
- Book Debts / Accounts Receivable – Optional sections where records are lost/damaged (policy dependent).
- Additional Increase in Cost – Some wordings extend the ability to spend to reduce the loss (limits apply).
Indemnity Period: 12 Months Is Often Not Enough
Manufacturers frequently select an indemnity period that looks sensible on paper — then discover that reinstatement is slower than expected. Planning, contractor availability, machinery lead times, installation, commissioning, validation and re-certification can extend downtime.
A realistic indemnity period is one of the most important BI decisions you make. If the indemnity period runs out before you are back to normal turnover, you can be left funding the tail of recovery yourself.
- 12 / 18 / 24 / 36 Months – Choose based on worst-case reinstatement, not best-case optimism.
- Long-lead Machinery – Order-to-delivery-to-install can be many months.
- Tooling & Fixtures – Rebuilding jigs, fixtures and test rigs often drives critical path.
- Approvals & Compliance – Electrical sign-off, H&S, insurer requirements, customer audits.
- Supply Chain Bottlenecks – Replacement components/materials may have long lead times.
- Ramp-up Time – Even after restart, output may climb gradually rather than instantly.
What Underwriters Want to See for BI & Resilience
BI underwriters want confidence that a major loss won’t become a total business failure. They look at your dependence on specific machines/people, your recovery plan, and whether your numbers are credible and well evidenced.
Strong submissions combine practical resilience steps with clear financials (turnover, gross profit, and selected indemnity period).
- Turnover and gross profit calculations, with seasonal peaks and WIP considerations
- Chosen indemnity period and rationale (lead times, rebuild/commissioning timeline)
- Single points of failure: key machines, tooling, test rigs, specialist staff
- Outsourcing/contingency options: alternative sites, subcontract capacity, hire plant
- Critical supplier and customer dependencies (and whether extensions are needed)
- Continuity planning: IT/data backups, drawings/BOMs, production scheduling resilience
We thought we could be back up in 12 months. After the fire, lead times and re-commissioning took far longer. Insure24 helped us rework our BI numbers and indemnity period so the policy matched reality.
Finance Director, UK Equipment ManufacturerPROTECT YOUR BUSINESS
- BI and loss of income structured around your production reality and recovery timeline
- Support evidencing gross profit, WIP, seasonality and indemnity period rationale
- Guidance on dependencies: key machines, utilities, suppliers and customer concentration
- Advice on increased cost of working: outsourcing, hire plant, overtime and temp premises
- Clear documentation to support claims readiness and lender/landlord requirements
Compliance & Governance Considerations
Business interruption insurance for manufacturers commonly needs to align with practical expectations such as:
- Documented business continuity and disaster recovery planning (roles, suppliers, contacts)
- Up-to-date financials for turnover and gross profit calculations (with audit trail)
- Asset registers and critical equipment lists to evidence dependencies
- Backups for drawings, BOMs, CNC programs and production documentation
- Practical resilience measures (utilities contingency, subcontract options, hire plant)
FREQUENTLY ASKED QUESTIONS
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Is business interruption insurance the same as loss of income insurance?
They are closely related. “Business interruption” is the common UK term and often covers loss of gross profit and increased cost of working following insured physical damage. “Loss of income” is sometimes used as shorthand, but the calculation basis and triggers depend on the policy wording.
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What triggers a BI claim for a manufacturer?
BI is typically triggered by insured physical damage at your premises (for example, fire, flood, escape of water or storm) under the linked property policy. Some extensions can broaden triggers (such as certain utilities failures or supplier/customer dependencies), but these are wording dependent.
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How do we choose the right indemnity period?
Base it on realistic worst-case reinstatement. Consider contractor availability, planning approvals, long-lead machinery, installation, commissioning and ramp-up time. Many manufacturers select 18–24 months (or more) where lead times and specialist equipment drive recovery.
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What is “increased cost of working” and why does it matter?
Increased cost of working is the extra spend you reasonably incur to reduce the BI loss — for example overtime, outsourcing production, hire equipment, temporary premises or expedited shipping. It matters because it can help you keep customers and protect turnover during recovery, subject to the policy’s limits and conditions.
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Does BI cover customer penalties and liquidated damages?
Usually not as a straightforward “pay the penalty” cover. BI typically focuses on trading loss (gross profit) and extra costs of working after insured damage. Contractual penalties and liquidated damages are often excluded or restricted. This is why contract review, limitation of liability and resilience planning are important alongside insurance.
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What information helps insurers quote BI for an equipment manufacturer?
Insurers typically want turnover and gross profit figures (and how you calculated them), the chosen indemnity period, dependencies on key machines/suppliers/utilities, claims history, and details of property risk controls. A simple recovery timeline and contingency plan can also strengthen the submission.