What is a consequential loss and can businesses insure against it?

WHAT IS A CONSEQUENTIAL LOSS?

When examining insurance policies for a commercial venture, you may well encounter the term consequential loss. A consequential loss is a loss that has been incurred as a result of being unable to use equipment within a commercial property, or being unable to use the property itself. For example, if a natural disaster or accident causes damage to a shop and it is therefore unable to trade, this loss of revenue would be considered a consequential loss.

In addition, a consequential loss is an indirect loss. As this is separate to a direct loss, it is important to conduct careful research when selecting insurance as not all policies will provide this kind of cover.

Is consequential loss covered in insurance?

A consequential loss is an indirect loss, as opposed to a direct loss, and so careful research when selecting insurance is imperative, as not all policies will provide this kind of cover. Insurance may also be able to compensate for consequential loss even when no direct losses have been incurred. For example, if a power cut or breach of contract from supplier or business partner impacted your ability to trade, you may be able to be covered for this consequential loss. Each policy provider is different, so make sure to do your research when selecting your insurance.

What is business interruption insurance?

Business interruption insurance, also termed business income insurance, is a type of insurance that covers the loss of income that a business can encounter after suffering a disaster or accident. This loss of income can be due to closure altogether, limited opening hours, or the process of rebuilding. For example, if there were to be a fire in a shop, damage to the goods for sale or property itself would be a direct loss. The loss of revenue while the shop closes to repair and order more stock would be the consequential loss.

Certain businesses can certainly benefit from this type of insurance, such as retail establishments, along with pubs and restaurants. It can also be helpful for those working in trades, such as plumbers and electricians. If a fire or disaster damaged tools and equipment, business interruption insurance could provide much-needed financial support while they recover their consequential losses.

What are the benefits of business interruption insurance?

With this insurance, those affected can avail of financial support in the interim while getting back to trading, and can also cover things like employee salary too. It can be a helpful source of income if you have to rebuild or repair in order to reopen an establishment. When it comes to leasing property in a commercial building then, ensuring this coverage is in place is nothing short of crucial.

If you would like to learn more about how you can protect your business from avoidable profit loss, and cover consequential loss during a construction project, contact one of our team today and we will provide expert guidance to find the best insurance solution for you.