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Business Interruption Expected Claim Calculator

This calculator estimates the expected annual insurance payout associated with a possible business interruption claim. It combines the probability of a covered interruption with a modeled business-income loss, a dollar retention, and a policy limit. The output can help a business compare the expected value of coverage with premiums or test how changes in retention and limits affect the amount transferred to the insurer.

Business interruption insurance is contract-specific: coverage may depend on direct physical loss, waiting periods, the period of restoration, covered expenses, exclusions, and other policy language. The calculator therefore uses a simplified indemnity model. It does not determine whether an event is covered, and it should not be used as a substitute for a policy review or claim adjustment.

Expected claim assumptions

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USD
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Result
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Expected annual insurer payout
Payout if modeled claim occurs—
Modeled retained loss—
Share of modeled loss transferred—
Annual claim probability—

1. Enter annual claim probability
Use the estimated chance that one covered interruption occurs during the year.

2. Enter the modeled covered loss
Use the business-income loss you expect the policy calculation to recognize before retention and limits.

3. Enter the retention
Provide the deductible or a reasonable dollar equivalent of any retention you are intentionally modeling.

4. Enter the policy limit
Use the limit applicable to the modeled business interruption loss.

5. Review expected payout
The tool first estimates payout for the modeled claim, then multiplies it by annual claim probability.

Claim payout = min(max(Covered loss − Retention, 0), Policy limit)
Expected annual payout = Claim probability × Claim payout
Retained loss = Covered loss − Claim payout

Where:

  • Covered loss = modeled covered business-income loss in dollars
  • Retention = modeled amount absorbed before insurance payment
  • Policy limit = maximum payout used by this simplified model
  • Claim probability = annual probability of the modeled covered interruption

Assumptions: The calculation assumes one representative claim and a dollar retention. It does not model waiting-period mechanics, coinsurance, extra expense sublimits, coverage disputes, multiple occurrences, or policy-specific definitions.

What the result means

Expected annual payout is a probability-weighted value useful for planning and comparison; it is not the amount you should expect to receive in a particular year.

A real claim may be zero, the full covered amount up to limits, or another amount depending on the event and contract terms.

Given:

  • Annual covered-interruption probability: 6%
  • Modeled covered loss: $150,000
  • Retention: $10,000
  • Policy limit: $250,000

Calculation:
Claim payout = min(max($150,000 − $10,000, 0), $250,000) = $140,000
Expected annual payout = 0.06 × $140,000 = $8,400
Retained loss = $150,000 − $140,000 = $10,000

Result: Expected annual insurer payout = $8,400.

The $8,400 figure is the probability-weighted annual value of the modeled payout, not a guaranteed payment or claim forecast.

Why is the expected payout much smaller than the claim payout?

The expected value multiplies the payout by the chance of the claim occurring. A large potential claim can therefore have a much smaller annual expected value when its probability is low.

Should I include lost revenue or lost profit as the covered loss?

Use the loss measure that matches the policy and your analysis. Business interruption coverage often focuses on business income and covered continuing or extra expenses rather than simply gross revenue.

What happens when the loss is below the retention?

The modeled payout becomes zero because the entire loss falls within the retained amount. Actual policy mechanics can differ, especially with time-based waiting periods.

Can this calculator determine whether my interruption is covered?

No. Coverage depends on the policy wording and facts of the event. This calculator only applies arithmetic to a loss you have already chosen to treat as covered for scenario analysis.

How can I use this with a premium quote?

You can compare expected payout with premium as one planning metric, but expected value alone does not capture risk reduction, liquidity protection, exclusions, or the severity of a large interruption.