Consequential losses are traditionally covered by a separate type of insurance called Business Interruption insurance (sometimes also called Consequential Loss insurance). This type of insurance can protect against, but not limited to, loss of profits due to the interruption of the business and also Increased Cost Of Working expenses which are necessary and reasonable for business recovery.
This type of cover is subject to a material damage proviso, for there to be a valid claim under a business interruption insurance, there must be a Property Damage insurance in force, under which the claim for the property damage which caused the business interruption in the first place has been accepted by insurers.
Consequential losses due to war, civil war, terrorism and acts of this nature are excluded under a Business Interruption insurance.
All types of businesses can benefit from this type of insurance as it helps them get back on their feet and trade again after a significant property damage loss. Approx 2/3rds of UK SMEs do not have Business Interruption cover (May 2014).
What are your consequential losses in the event of an incident? Does your current insurance policy cover this type of risk? Is it important that you have this cover in place? If your business burnt down tomorrow, how long would it take you to get to the same level of trading as before the loss? What about your customers? If cover is already in place, are your sums insured and indemnity periods adequate? Does the cover you for all eventualities?
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