Consequential Loss Policy
Consequential Loss Policy also known as Business Interruption Policy is taken to cover potential loss of profit or revenue from business in case of reduction in production following damage to the insured property.
This policy is taken as an extension of Fire Insurance Policy (Standard Fire and Special Perils Insurance Policy) or Machinery Breakdown Policy.
This policy should be taken by all Organizations whether large or SME to protect their Financial Loss due to interruption in business following damage to its property.
- Loss of Gross Profit
- Increased Cost of Working incurred in minimizing the Loss of Gross Profit
- Standing charges (fixed charges)
Financial Losses arising out of following expenses can also be taken as add-on covers in the Consequential Loss Policy.
- Wages of Workers
- Auditor’s Fees
- Public Utilities
- Terrorism
- Lay-off or Retrenchment Compensation
- Customer’s Extensions
- Supplier’s Extensions
The maximum period of indemnity in Consequential Loss Policy would be 3 years.
Gross Profit = Net Profit + Standing Charges
Net Profit can be calculated based on any one of the following
- Turnover of company
- Revenue of company
- Output of company
- If there is a reduction in turnover due to Fire Loss then the Insured should immediately register a claim under Consequential Loss Policy with Insurance Company.
- Claim form duly filled and signed/stamped by insured should be submitted with insurance company
- Insured should submit documents as a proof of reduction in turnover/revenue/output with insurance company
- Standing charges document should also be submitted
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