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Insurance explained
Business interruption insurance for charities is cover for income lost and extra costs incurred after insured damage stops a charity operating normally. It matters because a fire or flood can halt services and income for months.
Part of: Commercial insurance
In short
Business interruption insurance pays a charity's lost income and extra costs after insured damage, such as a fire or flood, disrupts its work. Shop takings, room hire, rent, service fees and events at the premises can usually be insured, while donations and grants need careful thought. Cover is written on a gross revenue or gross profit basis, and the indemnity period should reflect the real time to recover, often more than 12 months. Charity Commission guidance says cover should at least meet the cost of temporary premises and equipment during building work.
Business interruption (BI) insurance, sometimes called consequential loss cover, pays for income a charity loses and extra costs it incurs after insured damage stops it operating normally. The usual trigger is physical damage to the charity's own premises, such as a fire, flood or escape of water, that is covered under the property section of the policy. If the damage is not insured, the BI section does not normally respond either.
The Charity Commission's guidance on charities and insurance (CC49) says that "consequential loss insurance can be arranged to cover reductions in a charity's business income", and that where premises become unusable "the cover should at least meet the cost of hiring new premises and/or equipment for the duration of any building work." Its guide for trustees, The essential trustee (CC3), also tells trustees to "make sure the charity has sufficient insurance" for its property. For many charities, keeping services running for beneficiaries is as important as replacing lost money.
Our general guide to business interruption insurance covers how BI works for any organisation. The rest of this page looks at the points that are specific to charities.
Charity income rarely looks like a trading company's sales, so the first job is to map where money actually comes from and what would happen to each stream if the main building were out of use:
| Income stream | How it is usually treated |
|---|---|
| Charity shop and café takings | Commonly insured as trading income, much like a retailer's revenue. |
| Room hire and rent from tenants | Usually insurable as rent receivable or revenue; see loss of rent insurance. |
| Fees and contract income for services | Insurable where the service stops because of the damage, subject to the policy terms. |
| Fundraising events held at the premises | Can be included as revenue; events elsewhere usually need event cancellation insurance. |
| Grants | Often continue, but some funders may claw back or pause payments if outputs are not delivered; check grant terms and tell the insurer. |
| Voluntary donations | Hard to link to physical damage; some insurers will consider it, but it is commonly excluded or needs specific wording. |
Telling the insurer exactly which streams are included, and on what basis, avoids arguments later about whether a lost income line was ever covered.
BI cover is normally written on one of two bases. A gross profit basis insures revenue less the variable costs that would stop if trading stopped, such as stock purchases. A gross revenue basis insures the income itself. Many charities have few true variable costs, so a revenue or income basis is often simpler and easier to calculate, while charities with large retail operations may still use gross profit. Our page on gross profit vs gross revenue BI sets out the arithmetic.
Alongside lost income, policies usually include increased cost of working: reasonable extra spending to keep services going, such as renting temporary space, moving a helpline or running a shop from a pop-up unit. See our explainer on increased cost of working. Some charities choose cover for additional increased costs, which can pay for keeping services running even where the spending is more than the income it saves.
Underinsurance is a real risk. If the sum insured is lower than the actual annual income for the basis chosen, an average clause may reduce a claim proportionately, subject to the policy terms. Declaring figures based on the latest accounts plus expected growth is the usual starting point.
The indemnity period is the maximum time after the damage during which lost income is covered. It should match how long it would really take to get back to normal, not just to repair the building. For a charity that might include:
Twelve months is often too short for a serious fire at an older building. Our guides to the BI indemnity period and choosing an indemnity period, and the indemnity period checker, walk through the timeline.
These are illustrative examples, not advice on any real charity.
The most common misunderstanding is that BI covers any fall in income. It usually does not. A drop in donations during an economic downturn, the loss of a major funder, reputational damage or a cancelled appeal is not normally covered unless it follows insured physical damage or falls within a specific extension.
Extensions that can matter to charities include:
Outdoor fundraising events raise separate issues. CC49 notes that event cover often comes with "strict time limits and arrangements for measuring rainfall levels" and recommends professional advice. The Fundraising Regulator's events standards also expect organisers to be clear about who is insuring against each risk. See event cancellation insurance and our page on fundraising events and trustee liability.
Our charity insurance guide shows how BI fits with the rest of a charity's programme.
Apex arranges property and business interruption cover for charities; a broker reads every enquiry.
It is not a legal requirement, but many charities buy it because losing their building would stop income and services. Charity Commission guidance (CC49) says consequential loss insurance can cover reductions in income and should at least meet the cost of temporary premises and equipment during building work.
Not usually on its own. BI normally responds to income lost because insured damage disrupts the charity. A general fall in donations, or the loss of a funder, is commonly outside cover. Some insurers will consider specific wording for donation income linked to damaged premises, subject to the policy terms.
Long enough to get fully back to normal, including planning or listed building consent, rebuilding, refitting and rebuilding income from hirers, shoppers and referrers. Twelve months is often too short after a serious fire, so many organisations consider 18, 24 or 36 months.
Usually not. BI generally covers income lost after damage to the charity's premises. Cancelled fundraising events, including weather-related cancellations, are normally insured under a separate event cancellation policy with its own conditions and time limits.
Tell us what your business does, your turnover and any claims. A broker reads every enquiry and comes back with options. No fee for a quote. Or call 0117 325 0027.
Start a commercial enquiry Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
