26 November 2025
In the life science sector, the path from research to revenue is long, complex, and heavily regulated.
Whether developing a new drug, reformulating a treatment, or designing a medical device, companies face lengthy timelines involving laboratory research, clinical trials, regulatory approvals, and manufacturing scale-up. In this context, having a business interruption (BI) insurance policy with an adequate indemnity period is a critical component of risk management.
What is the indemnity period?
The indemnity period is the maximum length of time your business interruption policy will pay for lost income and extra expenses following a covered event, such as a fire or flood. It begins when the damage occurs and continues until the business returns to its pre-loss condition, or until the period expires.
Why standard indemnity periods fall short
Many BI policies come with standard indemnity periods of 12 or 18 months. While this may be adequate for a typical commercial operation, it's often far too short for life science companies. A disruption in a research lab or clinical trial facility can delay years of work, and recovery might involve not just physical reconstruction but also re-running studies, replacing specialized equipment, and reapplying for regulatory approvals.
In such cases, income -or crucial milestone payments- may not resume for two to three years or more. If the indemnity period ends before the company is fully back on track, the financial shortfall can be severe, threatening operations, investor confidence, and future development.
Tailoring coverage to real timelines
To avoid this risk, life science companies must work closely with knowledgeable insurance advisors to assess their true exposure and ensure the indemnity period aligns with their specific development cycle. For early-stage biotech firms or companies heavily reliant on key R&D milestones, an indemnity period of 24 to 36 months may often be more appropriate.
In the life science sector, where recovery from disruption is measured in years (not months), a standard indemnity period is rarely sufficient.
Ensuring your business interruption insurance includes a long enough indemnity period is essential to safeguard your operations, protect future earnings, and maintain the continuity of your innovation pipeline. It’s a strategic investment in long-term resilience.
This material is for general information only and does not constitute advice or a personal recommendation. Business interruption cover, indemnity periods and policy terms may vary by insurer and individual circumstances.
