What happens to your income while the building is being rebuilt
A fire in the grain store does more than destroy the store and the grain inside it. It stops you drying and storing next season's harvest, delays sales, and may force you to hire space elsewhere while the building is reinstated. Farm buildings insurance pays to rebuild the structure, but it does not replace the income you lose while that rebuilding is happening. That gap is what business interruption insurance is designed to close.
The same problem shows up after other events too: a flooded parlour that stops milking, a notifiable disease outbreak that closes the farm to movement, a machinery fire that halts harvest at the worst possible week. In each case the physical damage is only part of the loss. The trading loss that follows can run on for months, and it is this ongoing loss that business interruption cover is built to address.
What the cover typically pays for
Most business interruption policies for farms are built around two things: the income the farm would have earned had the interruption not happened, and any extra cost the farm takes on to keep trading while it recovers. Policies vary between insurers, so the individual policy document governs what applies to you, but the cover typically includes:
- Loss of gross profit, calculated against your farm's trading figures before the event
- Increased cost of working, such as hiring temporary storage, contract drying, or alternative milking facilities
- Additional labour or transport costs needed to keep the farm operating during the disruption
- Loss of rent, where a farm cottage or let building is out of use following an insured event
The word doing most of the work in that first item is gross profit. Insurers do not simply pay your normal turnover for the period you are shut down. They calculate what you would have earned, minus the costs you did not have to pay because you were not producing, such as feed you did not buy or fuel you did not use. Getting this figure wrong at the outset, either by under-declaring your farm's turnover or misunderstanding how the insurer calculates it, is one of the most common reasons a payout disappoints a farmer who assumed it would simply replace lost income pound for pound.
How long the cover actually runs for
Every business interruption policy sets an indemnity period, the maximum length of time the insurer will pay for lost income following an event. This matters more on a farm than in most other businesses, because farming income does not recover the moment a building is rebuilt. A dairy herd culled after a disease outbreak takes time to replace and build back up to full yield. An orchard or a field of perennial crops can take seasons to return to normal output.
A twelve-month indemnity period is common on standard commercial policies, but it can leave a serious gap on a farm where recovery genuinely takes longer. Ask your broker whether the indemnity period on offer reflects how long your specific enterprise takes to get back to where it was.
What is usually excluded or restricted
Business interruption cover generally only responds where the interruption follows a cause that is itself covered elsewhere in your policy, such as fire, storm, flood, or an insured escape of water. If the underlying peril is not covered, or falls under an exclusion in your buildings or machinery cover, the interruption that follows it is unlikely to be covered either. This is why business interruption cover is best understood as sitting on top of your other farm insurance, rather than as a stand-alone policy.
- Loss of income caused by a general market downturn, rather than an insured event, is not covered
- Notifiable disease cover is often a separate extension, not automatically included, and the list of diseases covered varies between insurers
- Delays in rebuilding caused by planning permission, listed building consent, or your own decision to upgrade rather than simply reinstate are frequently excluded or capped
- Some policies exclude interruption arising from denial of access, where your farm is undamaged but a neighbouring event, such as a road closure or an outbreak on an adjoining holding, still stops you trading
Denial of access cover is worth asking about directly, because it is exactly the kind of gap that only becomes visible once a farmer is living through it. Foot and mouth restrictions, for example, have shut farms that suffered no damage at all.
What to check in the policy document before you rely on it
Three things decide whether business interruption cover will actually match your farm's real loss when the time comes.
- Sum insured basis: the cover is usually set as an annual figure representing your farm's gross profit. If this figure has not been reviewed since you took the policy out, and your turnover has grown, you may be underinsured without realising it.
- Index-linking: some policies automatically increase the sum insured each year in line with inflation, so the cover does not quietly fall behind rising costs. Check whether yours does this, and by how much.
- Trends clause: a well-drafted policy allows the insurer to adjust your payout to reflect growth or seasonal trends the farm would have experienced anyway. Without one, you can be paid based on a flat average of last year's figures, which may understate what you would genuinely have earned in a growing enterprise.
Questions worth putting to your broker
Because business interruption cover is calculated, the conversation with your broker before you buy matters.
- What indemnity period does the policy offer, and does it reflect how long recovery genuinely takes for this type of farm enterprise?
- Does the sum insured reflect current turnover, and is it index-linked?
- Is notifiable disease cover included, and if so, which diseases are listed?
- Does the policy respond to denial of access, where the farm itself is undamaged?
- How is gross profit calculated, and what figures will the insurer ask for at claim stage?
For related cover that often sits alongside business interruption, our guides to farm buildings insurance and livestock insurance cover the underlying perils that typically trigger it. If a claim has already been made and the payout looks lower than expected, our guide to farm insurance claims sets out what rights a farmer has when a claim goes wrong.
Business interruption cover pays for the income you lose. The two figures rarely match, which is exactly why the calculation behind the policy is worth understanding before you need to rely on it.
Insurance terms like indemnity period, gross profit, and index-linking are explained in more depth in our farm insurance glossary. If you are still working out which broker to speak to about arranging this kind of cover, our guide on finding a regulated farm insurance broker sets out what questions to ask before you commit to one.