Increased cost of working

~3 min read

Category: Business interruption insurance · Reviewed by the Apex broking team · Last reviewed 2026-08-20

In short: Increased cost of working (ICW) is the part of business interruption cover that pays the extra money spent to keep trading after insured damage — temporary premises, hired equipment, overtime, outsourcing. It is subject to an economic test: the expenditure must not exceed the gross profit loss it avoids. Additional increased cost of working (AICW) removes that test up to a separate limit, covering spending that is commercially sensible but fails the strict arithmetic.

Category: Business interruption insurance Also known as: ICW, increase in cost of working Related concepts: indemnity period, business interruption insurance

Definition

Business interruption cover on a gross profit or gross revenue basis has two working parts: the loss of gross profit (or revenue) itself, and increased cost of working — the additional expenditure necessarily and reasonably incurred to avoid or diminish the reduction in turnover during the indemnity period. Renting temporary premises, hiring replacement machinery, paying overtime, sub-contracting production, redirecting phone lines and re-printing marketing material are all classic ICW items.

The economic limit

Standard ICW is subject to what is usually called the economic test or economic limit: expenditure is only recoverable up to the amount of gross profit loss it actually avoids. Spend £1 to save £1 of insured loss and it is covered; spend more than the loss avoided and the excess is not. The logic is indemnity — the insurer will fund mitigation, but not leave the insured better off. The test is applied over the indemnity period, so expenditure that protects turnover beyond the end of the indemnity period earns no credit for the protection it gives after the period ends.

Additional increased cost of working

Additional increased cost of working (AICW) is a separate item of cover, with its own limit, for expenditure that fails the economic test. It matters because real recoveries involve spending that is commercially rational but arithmetically unprovable: paying a premium to keep a flagship contract whose loss would hurt for years, keeping a full workforce employed through a shutdown, or maintaining presence in a market where absence would be permanent. Businesses whose customers can switch supplier quickly — contract manufacturers, service firms, distributors — often carry more AICW risk than they realise.

A related structure is a policy written on an increased cost of working only basis, with no gross profit item at all. That suits businesses that could always keep trading from elsewhere at a price — some office-based firms, for example — but it leaves any actual fall in income uninsured, so it should be a deliberate choice, not a default.

How it works in practice

After a loss, ICW decisions are made quickly and under pressure: whether to hire, outsource, or wait for reinstatement. Insurers expect mitigation and the policy funds it, but disputes arise where spending was committed without reference to the loss adjuster or where the economic test bites late in the claim. The practical disciplines are to document the turnover being protected by each item of spend, involve the insurer early, and size AICW at placement by asking what the business would actually spend to survive its worst realistic interruption.

Why it matters

ICW is where a business interruption policy either keeps a business alive or watches it shrink. The difference between a programme with token AICW and one sized to the recovery plan is invisible at renewal and decisive after a fire. It should be set alongside the indemnity period, as part of one honest picture of how the business would really recover.

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Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email info@apexinsurancebrokers.co.uk, or request a quotation.

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