This policy offers protection against the loss of revenue as a result of an interruption in your business caused by fire, lightning or explosion to your property.
It is compulsary to take up this policy with any Fire Insurance policy.
The Consequential Loss Policy contains a Material Damage Proviso which states that a claim must be admitted in the Fire Policy before the loss in the Consequential Loss Policy is payable, as such a Fire Insurance policy must be in place in the event a claim arises.
Yes, the perils insured under the Consequential Loss Policy should be the same as those in the Fire Insurance Policy.
Uninsured Working Expenses are specified working expenses which are variables, i.e. they increase or decrease correspondingly with increase or decrease in turnover. Examples are packing materials, freight, carriage charges and marine insurance. You must deduct such charges from the Gross Profit because they will not be incurred during the period of interruption to your business.
You can either make a projection of the Gross Profit or alternatively you can insure the standing charges plus the estimated net profit.
Standing charges are fixed expenses which you will have to incur regardless of your turnover and which you must continue to incur even after a loss / damage. Examples of standing charges are rent, property tax, telephone bills, property and vehicle insurance, interest and directors’ fees.
Normally following a fire, you may not need to retain all the workers, e.g. daily rated employees not crucial to the business operations. However, you may also wish to retain those monthly paid employees or those employees who are critical to your operations. You can include the wages of these workers in the Gross Profit (i.e. you do not list them as Uninsured Working Expenses). Alternatively, you can insure Wages / Payroll separately from the Gross Profit.
It can be more or less than 12 months, depending on the nature of the business and how quickly the business can revert to normal in the event of the business being totally destroyed. Hence you can insure for as short as 3 months to as long as 36 months.
For periods less than 12 months, the sum insured will be 12 months of the Gross Profit. However, for periods longer than 12 months, the sum insured will have to be increased proportionately.
The policy can be extended to include such events as well as other events on the payment of additional premium. The common extensions are:
