Business Interruption Insurance Claim Calculator
How this business interruption insurance claim calculator works
This calculator gives you a planning-level estimate of a potential business interruption insurance claim after a covered loss such as a fire, storm damage, or equipment breakdown. It focuses on the core pieces many policies consider: lost income, continuing fixed expenses, and extra expenses you incur to reduce the length or impact of the interruption.
To keep things simple, the tool uses your average revenue and cost structure before the loss, then applies those numbers across the downtime period (minus any waiting period or time deductible in your policy). The result is an estimated amount of loss that you can use to frame conversations with your insurance professional or claims adjuster.
Key concepts and formulas used in the calculator
The tool follows a straightforward structure that resembles how many business interruption claims are evaluated, but in a simplified, linear way.
1. Lost revenue during downtime
Average revenue per day before loss is multiplied by the number of days you cannot operate (your covered downtime).
Covered downtime is:
If the waiting period is equal to or longer than the total downtime, the covered downtime is treated as zero.
2. Variable costs and gross profit
Variable costs are expenses that generally drop when your revenue drops, such as raw materials, shipping costs tied to sales, and some hourly labor. You enter these as a variable cost rate (percentage of revenue).
Estimated variable costs during covered downtime are calculated as:
Lost gross profit is then approximated as lost revenue minus variable costs that would have been incurred to earn that revenue.
3. Continuing fixed expenses
Continuing fixed expenses per day are costs you still have to pay even while your operations are partially or fully shut down. Typical examples include rent, many salaries, loan payments, some utilities, and insurance premiums.
The calculator multiplies your daily continuing fixed expenses by the covered downtime to estimate how much you must keep paying during the interruption.
4. Extra expenses
Extra expenses are additional costs you incur to reduce or avoid a larger loss, such as renting temporary premises, outsourcing production, or paying for expedited shipping to catch up on orders. You can enter the total extra expenses you expect or have incurred, and the tool adds them to the estimate.
Understanding and interpreting your estimated claim
The output of the calculator is an estimated claim amount based on the pieces above. In simple terms, it is:
- Lost gross profit during the covered downtime, plus
- Continuing fixed expenses that you still had to pay, plus
- Extra expenses you chose to incur to reduce or avoid a larger loss.
Use the estimate as a directional figure, not a guaranteed payout. Actual claim payments depend on your specific policy language, coverage limits, sublimits, exclusions, deductibles, proof of loss documentation, and how your insurer evaluates the facts of your situation.
If the number looks unexpectedly high or low, try adjusting:
- Average revenue per day: Use a different historical period (for example, last 3 months vs. last 12 months) or exclude unusual spikes.
- Variable cost rate: Include only costs that truly go away when you are not operating; fixed-like items should stay in fixed expenses.
- Downtime and waiting period: Align these with the dates your business was actually impaired and the waiting period shown in your policy.
- Extra expenses: Include only additional costs tied to mitigating the interruption, not normal operating costs.
Worked example
Imagine a retail business with the following situation:
- Average revenue per day before loss: $5,000
- Variable cost rate: 40%
- Continuing fixed expenses per day: $500
- Total downtime: 14 days
- Waiting period: 3 days
- Total extra expenses: $8,000 (temporary location and rush shipping)
First, calculate the covered downtime:
Covered downtime = 14 days total downtime − 3 day waiting period = 11 days.
Next, estimate lost revenue:
Lost revenue = $5,000 × 11 = $55,000.
Then estimate variable costs that would have been incurred to earn that revenue:
Variable costs = $55,000 × 40% = $22,000.
Lost gross profit is then approximately:
Lost gross profit = $55,000 − $22,000 = $33,000.
Continuing fixed expenses during covered downtime are:
Fixed expenses = $500 × 11 = $5,500.
Finally, add extra expenses:
Total estimated impact = $33,000 (lost gross profit) + $5,500 (fixed expenses) + $8,000 (extra expenses) = $46,500.
The calculator will produce an estimate in this range based on your inputs. An insurer may calculate certain elements differently, and policy terms can significantly change the final covered amount.
Comparison: what this calculator does and does not cover
| Aspect | Included in this calculator | Usually handled separately in real claims |
|---|---|---|
| Lost revenue and variable costs | Uses average daily revenue and a single variable cost rate across the covered downtime. | Insurers may use detailed financial statements, seasonality adjustments, and trend analyses. |
| Continuing fixed expenses | Simple estimate based on a daily fixed cost number multiplied by covered downtime. | Actual treatment can vary by policy wording, documentation, and negotiations with the adjuster. |
| Extra expenses | You enter a lump-sum estimate of eligible extra expenses. | Insurers often review invoices, contracts, and whether expenses actually reduced the loss. |
| Policy limits and sublimits | Not modeled; the tool does not cap results based on limits. | Claims are subject to limits, sublimits, and any endorsement-specific caps. |
| Deductibles and waiting periods | Waiting period is reflected by subtracting waiting days from downtime. | Policies may also include monetary deductibles or multiple waiting periods for different coverages. |
| Contingent or civil authority coverage | Not separately modeled; user would need to adjust downtime and revenue assumptions manually. | Actual claims may treat supplier outages, utility failures, or civil authority orders differently. |
Assumptions and limitations
This tool is intentionally simplified. It is designed for education and planning, not for preparing a formal proof of loss. Important assumptions include:
- Linear relationship between revenue and downtime: The calculator assumes that each day of downtime reduces revenue by the same average amount, with no seasonality or ramp-up time.
- Single variable cost rate: All variable expenses are combined into one percentage of revenue. In reality, some costs behave differently at different volumes.
- No policy-specific adjustments: The tool does not account for coverage limits, sublimits, exclusions, coinsurance clauses, period of indemnity rules, or special endorsements unless you manually reflect them in your inputs.
- No taxes, financing, or salvage value: The estimate does not model tax effects, financing arrangements, or salvage/resale of damaged goods.
- Data quality matters: Results are only as accurate as the assumptions and figures you enter.
Important: This calculator is for informational and educational purposes only. It is not legal, tax, or financial advice, and it does not guarantee coverage or payment under any insurance policy. For decisions about coverage, claim filing, or documentation, consult a licensed insurance professional, accountant, or attorney familiar with your situation.
When this calculator is most useful
You may find this tool especially helpful when you want to:
- Estimate the potential size of a claim shortly after a loss to understand business impact.
- Prepare for discussions with your insurance broker, risk manager, or claims adjuster.
- Compare different downtime scenarios (for example, a 10-day closure vs. a 30-day closure).
- Stress-test whether your current business interruption limits may be too low or too high.
For broader context, you may also want to review resources on business interruption coverage basics, commercial property insurance, and disaster recovery planning, and use this estimate alongside your financial statements and cash flow projections.
Why Business Interruption Claims Are Hard to Estimate
When a fire, flood, equipment failure, or other covered event shuts a business down, the immediate damage is visible: a burned kitchen, a broken HVAC unit, a water‑soaked retail floor. The financial damage is not. While you repair the physical problem, revenue drops or stops, but many expenses continue. Employees still need to be paid, leases still accrue, software subscriptions still renew, and debt payments still come due. Business interruption insurance exists to bridge that gap, replacing lost income so that the business can survive the interruption and reopen.
Yet business interruption claims are notoriously confusing. Policies use terms like “business income,” “period of restoration,” “continuing expenses,” and “extra expense.” Coverage often begins only after a waiting period. Some expenses are covered, others are not. Insurers may ask you to prove what your revenue would have been “but for” the loss, which requires comparing to historical performance and seasonality. Small businesses frequently underestimate their claim because they focus on gross revenue rather than lost profit plus continuing costs. Others overestimate by counting expenses that would have stopped anyway. A clear model helps you avoid both mistakes.
This calculator provides a practical, broadly applicable estimate. It is not a substitute for a forensic accountant, and it does not interpret policy language for you. But it will show the core arithmetic behind most claims and help you prepare for discussions with your insurer.
What Business Interruption Insurance Typically Covers
Most business interruption policies cover two main buckets during the “period of restoration” (the time it takes to repair or replace the damaged property and resume operations):
- Lost business income. This is the profit you would have earned if the loss had not happened. Policies usually define it as net income plus continuing normal operating expenses.
- Continuing expenses. Fixed costs that still occur even if you cannot operate, like rent, utilities minimums, key staff payroll, and loan interest.
Many policies also include extra expense coverage: reasonable additional costs you incur to reduce the interruption, such as renting temporary space, paying overtime to speed repairs, or leasing replacement equipment. Extra expense coverage can be a separate limit or part of the business income limit.
The Core Claim Formula
A simplified business income loss model starts with gross revenue, subtracts variable costs that would not have been incurred during shutdown, then adds continuing expenses and extra expenses. Let:
- R = average revenue per day before the loss
- v = variable cost rate (% of revenue that disappears when revenue disappears)
- F = continuing fixed expenses per day
- E = extra expenses per day (or total extra expenses)
- d = number of downtime days
- w = waiting period days (policy deductible in time)
Then covered days are max(0, d − w). The daily lost profit is revenue times (1 − variable rate). The basic claim estimate is:
This formula aligns with the common policy definition: net income plus continuing expenses, plus any qualifying extra expense.
Worked Example
Imagine a neighborhood bakery that averages $2,400 of revenue per day. About 45% of that revenue is variable cost (ingredients, packaging, hourly staff that can be reduced). The bakery’s continuing fixed expenses—rent, insurance, salaried manager, basic utilities—are about $600 per day. A kitchen fire closes the shop for 28 days. The policy has a 72‑hour (3‑day) waiting period. The owner spends $4,500 in extra expense renting a temporary commissary to keep wholesale orders alive.
Covered days are 28 − 3 = 25 days.
Daily lost profit is $2,400 × (1 − 0.45) = $1,320.
Daily business income loss plus continuing expenses is $1,320 + $600 = $1,920.
Loss for covered days is 25 × $1,920 = $48,000.
Add extra expenses of $4,500 for a total claim estimate of $52,500.
An insurer may adjust this for seasonality (for example, if the fire happened during a holiday rush), but the baseline math is correct.
Comparison Table: What Usually Counts
| Item | Typically Covered? | Notes |
|---|---|---|
| Lost net profit | Yes | Based on “but‑for” revenue |
| Rent / lease payments | Yes | Continuing fixed expense |
| Utilities minimums | Often | Depends on policy wording |
| Variable inventory costs | No | Not incurred during shutdown |
| Advertising to announce reopening | Sometimes | May qualify as extra expense |
| Fines or penalties | No | Usually excluded |
Period of Restoration and “Waiting Period”
Business interruption coverage is tied to time. Two time concepts matter:
- Waiting period. Often 48–72 hours. Losses during the waiting period are not covered, which is why the calculator subtracts waiting days from downtime days.
- Period of restoration. The period during which the insurer will pay for lost business income—usually from the date of loss until the property is repaired and the business can resume operations (or should have been able to, using reasonable speed and due diligence).
In practice, insurers sometimes challenge the length of the restoration period if they believe repairs could have been completed faster. Document supply chain constraints, permitting delays, and contractor scheduling. If you can partially reopen, your claim may shift from “total interruption” to “partial interruption,” where reduced revenue is compared to the but‑for baseline.
Seasonality and the “But‑For” Revenue Baseline
Many businesses are seasonal. A landscaping company loses more in spring than in winter; a toy store loses more in November and December; a hotel’s revenue depends on events and local tourism. Claims typically require a but‑for estimate of what revenue would have been during the downtime. A practical approach is to compare:
- Same weeks/months from the prior year.
- Trailing 3–12 month average adjusted for trend.
- Bookings on the calendar (for appointment‑based businesses).
This calculator uses an average revenue per day input, which works well if you pick a representative baseline for the affected period. If you know the downtime spans a peak season, use a peak‑season average.
Documentation Checklist
Claims are strengthened by clean, consistent documentation. A short checklist helps:
| Document | Why It Matters |
|---|---|
| Daily/weekly sales reports | Establishes but‑for revenue baseline |
| Bank deposits / merchant statements | Corroborates revenue figures |
| Payroll and lease records | Shows continuing expenses |
| Invoices and receipts for extra expense | Supports reimbursement and reasonableness |
| Repair timeline (contracts, permits, emails) | Justifies restoration period length |
Policy Limits and Coinsurance (Why “Math” Isn’t the Whole Story)
Many policies have a business income limit (for example, 12 months of coverage) and sometimes coinsurance requirements that penalize underinsuring. This estimator does not apply those provisions because they vary widely. If your policy has a stated limit, treat the estimate as capped at that limit. If your policy has coinsurance, compare your reported business income values to the required percentage to avoid surprises.
Limitations and Assumptions
This calculator uses a compact model so it works for many business types. It assumes:
- Revenue before loss is a good proxy for “but‑for” revenue during the interruption (no explicit seasonality modeling).
- Variable costs scale linearly with revenue.
- Continuing fixed expenses are stable per day.
- Extra expenses are entered as total qualifying costs.
- Policy limits, coinsurance requirements, and sub‑limits are not applied.
To refine a real claim, document daily sales history, compare to prior‑year periods, and keep receipts for all extra expenses. Many businesses also hire a public adjuster or forensic accountant to negotiate policy interpretations. Still, the estimate here gives you a solid, transparent starting point.