What is Fire Loss of Profits (Business Interruption) Insurance
A major accident at a business premises cannot only destroy the assets but also bring the business to a standstill, leading to loss of gross profit. Depending on the size and nature of business, it can be several months before the business can get back on track. This is usually a period of great financial stress for businesses, as fixed expenses such as rent, remuneration of employees, etc. continue to accrue regardless of the extent of damage and production loss.
Consequential losses to the insured business are specifically excluded under a standard Fire and Special Perils Insurance policy that covers only physical damage to the assets. This is where a Loss of Profit Insurance policy is useful, as it covers the loss of Gross Profit of a business arising from an insured loss under its Fire policy.
What’s covered
The policy covers loss of:Net Profit + Standing Charges + Expenses incurred necessarily and reasonably to bring the business back on track
A Loss of Profit Policies may carry an excess / deductible expressed in number of days. This indicates the days immediately after the loss, which would not be included while computing the reduction in Gross Profit.
What’s not covered
This policy does not provide coverage for:- Loss of gross profit due to a peril not covered under the Fire policy
- Difference between the value of stock at the time of fire and at the time of subsequent replacement
- Deterioration of undamaged stock after fire
- Cost of documentation for Fire and Loss of Profits claim
- Loss of goodwill
- Third party claims
- Other exclusions stated on the policy
What’s optional
The policy can be extended to cover:- Wages
- Accidental failure of public electricity / gas / water supply
- Damage to customer’s premises due to perils covered under Fire Policy
- Damage to Supplier’s premises due to perils covered under Fire Policy
- Auditor’s fees
- Lay –off and/ or retrenchment Compensation with or without Notice Wages Liability
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FAQ's
How do I cover items that I take away from the home?
What is accidental damage cover?
Are items in my garage or shed covered?
I live in rental accommodation. Do I still need insurance?
What is an excess?
Tips
- Ensure you declare a list of items to be insured under contents insurance including serial numbers, model, make and have the correct sum insured
- Always keep valuables safely and locked out of site to protect against the risk of theft