Keeping projects moving when disaster strikes: Business Interruption insurance explained

Construction sites, delivery operations, and manufacturing plants all run on tight schedules and complex coordination. A single unexpected event, whether it’s a fire, flood, equipment failure, or supplier delay, can bring everything to a halt. When this happens, the financial impact isn’t just about repairing damaged property; lost revenue, ongoing wages, and operational disruption can quickly spiral. That’s where Business Interruption (BI) insurance comes in.

What is Business Interruption insurance?

BI insurance is designed to cover the financial losses a business suffers when normal operations are disrupted due to an insured event. Unlike standard Property insurance, which only pays to repair or replace damaged assets, BI insurance helps businesses stay afloat during downtime and can provide the needed costs to enable businesses to continue to trade, covering any increased costs of working incurred.

It typically covers:

• Loss of income during the period of disruption.
• Fixed operating costs such as rent, utilities, and salaries.
• Extra expenses needed to reduce the downtime (for example, hiring temporary facilities or equipment).
• Losses caused by damage to a third-party supplier or client facility.

Why it matters for projects

Imagine a construction project where heavy machinery is damaged by a flood, a very common occurrence in the UK. Repairs may take weeks, but the financial consequences extend far beyond the cost of machinery. Subcontractors still need to be paid, permits and site maintenance continue, and deadlines loom. Without BI insurance, the company may be forced to shoulder these costs alone, potentially threatening project viability.

Common disasters your business could face

• Natural disasters: Floods, storms, or fires can halt operations and damage key equipment.
• Supply chain disruptions: If a supplier’s facility suffers a fire or breakdown, deliveries stop, impacting your ability to deliver your own projects.
• Operational failures: Machinery breakdowns, power outages, or IT failures can prevent work from continuing.

BI insurance ensures that companies can cover these unexpected expenses and maintain cash flow while repairs or replacements are underway.

Tips for maximising your cover

1. Understand the indemnity period: This is the length of time the insurer will cover losses. Choose a period that realistically reflects how long it could take to get operations fully back on track and for revenue levels to return to pre-loss levels.
2. Include extra expenses: Policies often allow for cover of temporary solutions to minimise downtime, like hiring alternative machinery or facilities.
3. Assess all revenue streams: Make sure your insurance accounts for all sources of income, including contracts in progress and ancillary services.
4. Review regularly: As projects evolve and your business grows, update your cover to ensure it still meets your company’s needs.

BI insurance is more than a safety net, it’s a lifeline for companies that rely on tight schedules, ongoing revenue, and complex operations. Disasters happen, but with the right cover, projects can keep moving, employees can be paid, and businesses can recover without crippling financial strain. Ultimately, BI insurance can be the difference between surviving a setback and facing long-term financial damage.

We are here to help

Our specialist Construction team are on hand to help protect your company from the nasty surprises that may come your way. Contact the team today to find out more.