- Generally insurance policies cover only physical damage to property by insured perils. This, at best, covers the expenses incurred for repairing or replacing the damaged property. But what about the financial loss suffered due to interruption of business operations whilst the damaged property is being repaired or replaced? Consequential Loss (Fire) Insurance offers a solution by covering profit lost due to
- reduction in turnover arising from interruption of business following damage to the property insured.
- This Policy can be taken only in conjunction with a Standard Fire and Special Perils Policy. This Policy is
- also known as Business Interruption Policy or Loss of Profit Policy.
- Scope of Cover
- Profits that would have been earned (based on prior months’ financial statements);
- Fixed Costs- Operating expenses and other costs still being incurred by the property
- Temporary Location- Some policies cover the extra expenses for moving to, and operating from, a temporary location;
- Extra Expenses- Reimbursement for reasonable expenses (beyond the fixed costs) that allow the business to continue operation while the property is being repaired.
- It is important to select the Indemnity Period (for a period of 3 / 6 / 12 months or more) during which the business can be restored to its pre-loss position following a loss.
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