Consequential Loss Policy
What is a consequential loss policy?
A consequential loss policy, often referred to as loss of profit insurance, covers the financial losses a business incurs due to an interruption or interference with its operations caused by a covered peril, like fire. This policy is separate from material damage insurance and aims to compensate for lost profits and increased working costs during the interruption period.
Key features
Key aspects of a consequential loss policy
- Covers indirect losses
- Loss of Gross Profit
- Increased Cost of Working
- Indemnity Period
- Sum Insured
- Relationship with Material Damage Policy
Add-on Covers
- Supplier’s extension
- Customer’s extension
- Failure of Public power supply/Gas works/water works
- Auditor’ fees
Coverage
Policy broadly Covers
- Loss of Gross Profit due to Reduction in Turnover
- Increased cost of working – The additional expenditure incurred for the purpose of avoiding or diminishing the Reduction in Turnover or Output.
Deductible
This Policy does not cover the deductible stated in the Schedule in respect of each and every loss under various covers. Deductible is generally defined in terms of number of days of standard gross profit.
Exclusions
All exclusions applicable for Material Damage (SFSP) policy are applicable for CLOP policy also.
