Insurance policies cover the physical damage to any properties that are insured against specified perils. But what about the financial losses incurred in terms of reduction in turnover due to the interruption in the business operations while the damaged property is being replaced/rebuilt? A Loss of Profits Insurance is the solution. The Loss of Profits Insurance is a policy that covers the monetary loss that is likely to occur due to a break in business activity which may be one of the consequences of physical loss of property due to an event that is already insured for. This insurance policy can be acquired by individuals or firms in conjunction with a prior Standard Fire and Perils Policy. This policy can also be issued in conjunction with machinery breakdown policy in which case it shall be called “A Machinery Loss of Profit Policy”

What does it cover?

  • Loss of Gross Profit
  • Increase in cost of working
  • Standing charges incurred in maintaining the business

What is not covered?

  • Loss of gross profits, which is not consequent upon property damage due to an insured peril
  • Loss due to material damage to property, difference between value of stock at the time of fire and the value at the time of subsequent replacement, deterioration of undamaged stock after fire
  • Cost of preparing fire and loss of profits claim