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Business interruption calculator
Estimate the gross profit sum insured for a business interruption policy from turnover, variable costs and the indemnity period.
Work out a gross profit sum insured
Annual gross profit
£300,000
Suggested sum insured
£315,000
An estimate only. Check the definition of gross profit in the policy wording and with the client's accountant.
How the calculation works
Gross profit for insurance is usually turnover minus variable costs (the costs that stop when trading stops, such as purchases of stock).
That annual figure is scaled to the indemnity period. For example, a 24-month indemnity period needs twice the annual gross profit. A growth allowance is added so the cover keeps up with the business.
Choosing an indemnity period
- Think about how long it would take to rebuild, refit and win customers back, not just to reopen.
- 12 months is often too short for businesses in their own premises or with specialist equipment.
- Listed or hard-to-rebuild premises usually need longer.
Common mistakes
- Using net profit instead of gross profit.
- Not updating the figure each year as turnover changes.
- Choosing an indemnity period to save premium rather than to match real recovery time.
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