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CASH FLOW PROTECTION THAT HELPS YOU TAKE OFF
Why Business Interruption Matters in Plastic Manufacturing
Plastic manufacturing is capital intensive and schedule driven. When a key machine goes down, a mould is damaged, a fire damages your building, or a flood destroys stock, the immediate repair bill is only part of the problem. The bigger risk is lost output and lost margin — and the cash flow squeeze that follows.
Business Interruption (BI) insurance is designed to protect your business’s gross profit (or loss of income) if trading is disrupted by an insured event. It can also cover additional or “increased” costs of working — such as outsourcing production, overtime, and expedited freight — to help you keep supplying customers.
Insure24 arranges business interruption insurance for plastic manufacturers across the UK, helping you choose realistic indemnity periods and sums insured that match the real time it takes to repair machinery, replace tooling, rebuild capacity and recover your customer order book.
How Business Interruption (BI) Insurance Works
BI insurance is usually linked to an underlying “material damage” policy — typically property insurance. In simple terms: if an insured event causes physical damage (for example, a fire), BI can pay for the financial losses that follow while you repair and return to normal trading.
Many manufacturers assume BI is automatically “enough” if they add it as a small extra. In reality, BI is one of the most common areas of underinsurance because the sums insured and indemnity period are easy to underestimate. In plastics manufacturing, repair timelines can be extended by machinery lead times, mould replacement, validation of production, and rebuilding customer schedules.
BI policies can be written on a gross profit basis (common for manufacturing) or on a loss of revenue/income basis, depending on the nature of your business.
What BI Typically Covers
- Loss of gross profit due to reduced turnover during disruption
- Standing charges and fixed costs that continue during downtime
- Increased cost of working (overtime, outsourcing, temporary premises)
- Extra expenses to reduce the interruption period (where justified)
- Some supply chain extensions (wording dependent)
The exact scope depends on policy wording. Your broker should help ensure the cover aligns with how your business earns money and what costs you must keep paying.
Common BI Triggers in Plastics
- Fire, smoke and heat damage affecting production and stock
- Flood/escape of water damaging plant, electrics or raw materials
- Machinery breakdown on a bottleneck line (if included/extended)
- Tooling damage delaying ability to manufacture parts
- Utility failures impacting multiple lines (wording dependent)
If your biggest risk is breakdown (not fire), consider a machinery breakdown BI extension so downtime from insured breakdown events can trigger BI payments.
Indemnity Periods: The Most Common BI Mistake
The indemnity period is the maximum time your BI policy will pay for losses following an insured event. Many businesses select 12 months by default — but for manufacturing that can be too short. In plastics, recovery can involve more than repairs: you may need to source replacement tooling, reconfigure production, restore scrap and rework levels, re-win customer schedules, and build buffer stock again.
A practical way to choose an indemnity period is to work backwards from “normal output and normal margin restored”, not from “machines repaired”. If you lose a key customer programme or suffer long-term delivery disruption, you may need a longer period to recover sales and profitability.
It’s also important to set the gross profit sum insured correctly. Underinsurance can reduce claim payments, even if the incident is covered.
Factors That Extend Recovery Time
- Lead times for replacement machines or major components
- Tooling rework/replacement and sampling approvals
- Electrical reinstatement and commissioning delays
- Need to outsource parts and then bring production back in-house
- Rebuilding customer delivery schedules and service levels
- Regulated customer approvals (food contact, medical, automotive)
Selecting the right indemnity period is one of the biggest levers in protecting your business after a major event.
Typical Extra Expense Items
- Overtime and extra shifts
- Outsourcing production to third parties
- Hiring temporary equipment or space
- Expedited freight and special deliveries
- Additional QA/QC and rework to stabilise output
A well-structured BI policy doesn’t just pay for losses — it can fund the actions that shorten disruption and protect key customer relationships.
“After a fire we rebuilt the workshop quickly — but it took much longer to restore throughput and customer schedules. BI cover helped protect cash flow while we recovered.”
Director, UK Plastic ManufacturerPROTECT YOURSELF
- BI sums insured aligned to your gross profit and fixed costs
- Indemnity periods chosen for realistic manufacturing recovery time
- Breakdown BI extensions for bottleneck machinery (where needed)
- Supply chain extensions (suppliers/customers) where relevant
- Support structuring increased cost of working to protect output
Insure24 helps plastic manufacturers structure BI cover that protects cash flow — not just “ticks the box”. If you want to sense-check your current BI sums insured or review your indemnity period, call 0330 127 2333.
FREQUENTLY ASKED QUESTIONS
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What is business interruption insurance for a plastic manufacturer?
Business interruption insurance is designed to protect your gross profit (or loss of income) if an insured event disrupts your ability to trade. For plastic manufacturers, it can help replace lost margin during downtime and cover extra expense like outsourcing, overtime and expedited freight, subject to policy triggers and wording.
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Is BI always linked to property damage?
Often yes. Many BI policies are written as an extension to property insurance and require physical damage as the trigger (e.g., fire or flood). If your main risk is machinery breakdown, you may need a machinery breakdown BI extension to cover insured breakdown events that stop production.
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How long should the indemnity period be for plastics manufacturing?
It depends on how quickly you can restore “normal output and margin”, not just repair equipment. Many manufacturers choose 12 months by default, but if you have long machinery lead times, customer-owned tooling, regulated approvals or single bottleneck lines, you may need a longer period such as 18–36 months.
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What is “increased cost of working” in BI insurance?
Increased cost of working (ICOW) covers additional expenses you reasonably incur to reduce the interruption and keep trading — such as outsourcing production, overtime, hiring temporary equipment or premises, and expedited freight — subject to policy terms and the economic limit of cover.
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Does BI cover supply chain disruption?
It can, but only if you have the right extensions. Some policies offer supplier or customer dependency cover, but the scope, triggers and sub-limits vary. If you rely on a single resin supplier, a single toolmaker, or a key customer programme, it’s worth reviewing supply chain options.
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How do I get a quote for business interruption insurance?
Call 0330 127 2333 or request a quote online. We’ll ask about turnover, gross profit, key machines and bottlenecks, property and stock values, recovery timelines, and any breakdown or supply chain dependencies to structure the right BI cover.