Free business interruption calculator
Would your client's BI cover carry them through?
Work out gross profit the insurer's way, map the recovery after a major loss and see the indemnity period and sum insured it needs. Then send the client a branded PDF.
Example figures. Change them to your client's.
1The year's figures
2Sort the costs: what stops if trading stops?
Tap the arrow to move a cost across. Tap a name for a hint.
Stops with trading
Comes off turnover
Keeps running
Stays in, so it is insured
3Map the recovery after a major loss
4The policy today
Current indemnity period
Insure £6.93m of gross profit over 24 months.
Today's 12 months leaves 7 uninsured
Each block is a stage of the recovery. Hatched months are past the end of cover.
Insurance gross profit
£3.3m
53.2% of turnover
Uninsured working expenses
£2.94m
Taken off turnover
- About £2,021,250 of lost gross profit falls after the 12 month period, whatever the sum insured.
- A year's gross profit grown 5% is £3,465,000. Over 24 months that is £6,930,000.
- If the policy is declaration linked there is no average and cover runs to 133⅓% of the estimate declared.
Doing this for a whole book? Keep every client's BI figures with a free trial
What to tell your client
Your business would take about 19 months to recover from a major loss, so the indemnity period should be at least 24 months and the gross profit sum insured about £6,930,000. On today's 12 month period, about £2,021,250 of lost gross profit would not be covered.
Illustrative only, not advice. The policy wording and the insurer decide. Nothing you type leaves your browser unless you make the PDF.
Why it matters
Business interruption is where the big losses are
70%
more, on average, for a business interruption claim than the property damage claim behind it.
Allianz Commercial, BI claims 2021 to 202554%
of claims managers say business interruption cover is not always adequate.
Gallagher claims survey, 202424
months is the least BIBA suggests brokers assume for an indemnity period.
BIBA, via Insurance Times
In plain English
Two numbers decide whether BI pays enough
The gross profit it insures, and how long it pays for. Get either wrong and the business funds the gap.
Gross profit isn't the accounts figure
Insurance gross profit is turnover less only the costs that stop when trading stops. Wages, rent and loan interest keep running, so they stay in and are insured.
The clock runs out
The indemnity period is how long the policy pays for. Rebuilding, approvals and winning customers back often take far more than 12 months.
Short sums insured are averaged
If the sum insured is less than the gross profit for the period, many policies pay only the same share of the claim. Declaration linked cover avoids that.
Accountant or insurer
Why the accounts figure leaves clients short
An accountant's gross profit takes off the cost of sales, often including wages and factory overheads. An insurer's takes off only what stops when trading stops. The difference is the part of the business most likely to be uninsured.
Often too low to insure
The accountant's gross profit
- 1Sales
- 2Less cost of sales
- 3Less direct wages
- 4Less factory overheads
What the sum insured is based on
The insurer's gross profit
- 1Turnover
- 2Plus closing stock, less opening stock
- 3Less purchases and other costs that stop
- 4Wages and overheads stay in
The case brokers remember
Eurokey: a 12 month period and a turnover well short
A recycling business in Leicestershire burned down weeks after its cover started. The BI sum insured rested on a turnover estimate of £11m when the accounts showed nearly £17m, over a 12 month indemnity period the client chose. The business sued its broker for the shortfall.
The broker won because it had explained how to work out the figures. The client lost because nobody planned the recovery.
Eurokey Recycling v Giles Insurance Brokers [2014] EWHC 2989- Turnover declared
- £11m
- Turnover in the accounts
- £16.8m
- Indemnity period
- 12 months
- Claim against the broker
- Dismissed
cleared
How brokers set it
Three rules for business interruption cover
- 1
Start from the insurance definition
Use turnover less uninsured working expenses (the difference basis). Building up from net profit tends to miss standing charges.
Howden, gross profit definitions - 2
Plan the recovery, then pick the period
Walk through each stage after a major loss with the client. The period should cover the whole recovery, not the time to reopen the doors.
Swiss Re Corporate Solutions - 3
Explain it and keep a note
In Eurokey v Giles the broker escaped liability because it had explained how to set the figures. A short letter to the client is the best record.
Eurokey Recycling v Giles Insurance Brokers [2014] EWHC 2989
The client PDF
A letter that shows the client the gap, on your letterhead
Your logo and details, the gross profit worksheet, the recovery timeline and the sum insured needed. It reads as your advice, and it is your record that you explained it.
- Gross profit worksheet
- Recovery timeline, stage by stage
- Indemnity period and sum insured
- Checklist for renewal
Would your business interruption cover carry you through?
£4.3m
Gross profit
24 mths
Period needed
£9.03m
Sum insured
Before renewal
- ☐ Check gross profit with your accountant
- ☐ Agree the indemnity period
- ☐ Ask about increased cost of working
Test yourself
Accountant or insurer? Five business interruption traps
Most BI shortfalls start with a sensible looking figure from the accounts. See how many of these you would catch.
Which cost usually comes off turnover to get insurance gross profit?
Questions brokers ask
Business interruption, answered
- What is insurable gross profit?
- Turnover, plus closing stock, less opening stock, less the costs that stop when trading stops (uninsured working expenses, usually purchases of stock and materials). It is usually much higher than gross profit in the accounts.
- Should wages be insured?
- Usually yes. Most businesses keep paying key staff after a loss, so wages are left in the gross profit. Some policies insure wages separately for a shorter period. Sort wages into the column that matches how the policy treats them.
- How long should the indemnity period be?
- Long enough to get back to the turnover the business would have had. Map site clearance, design and approvals, rebuilding, plant lead times and the time to win customers back. For most premises that is more than 12 months.
- What does declaration linked mean?
- The client declares an estimated gross profit at the start of each year. There is no average, cover runs to 133⅓% of the estimate and the premium is adjusted once actual figures are known.
- Does this give a valuation or advice?
- No. It works through the arithmetic with the figures you enter. The policy wording decides what is paid, and the client's accountant should confirm the gross profit.
- Is my client's data stored?
- No. The calculator runs in your browser. Figures only leave it if you make the PDF, which goes to our report builder to print.
With a free trial
Run this for every client, and again at each renewal
Coverbound keeps the figures with the client, reminds you before renewal and drops the result into your renewal report. 14 days free, no card.
Check a client's BI before the next fire does
Five minutes now, or a very long conversation later.
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