Fire Standard & Special Perils Policy covers only the material damage, financial loss caused to your property covered under the Policy by Fire or by any of the Special Perils covered under the Policy like Flood, Storm or by Riot, Strike & Malicious Damage. But due to this, your Business enterprise, be it a shop or godown or industrial unit etc may have to suspend its normal business activities thus causing reduction in your turnover or you may have to incur certain additional expenditure for keeping normal operation of your business activity maintained. These Consequential losses are not covered under Fire Standard & Special Perils
Thus, a Fire Loss of Profit Insurance addresses to this important business requirements. It covers Loss of Gross Profit and /or increase in cost of working due to reduction in turnover/output due to operation of peril covered in the Standard Fire & Special Perils Policy. Only essential pre-requisite of this Insurance is that there must be in force a Standard Fire & Special Perils Policy covering the risk.
This insurance is also known by name Business Interruption / Consequential Loss Insurance
Coverage under Fire Loss of Profit (FLOP) / Business Interruption this Insurance includes
- Loss of Net Trading Profit.
- Standing Charges (these are overhead expenses such as salaries, taxes, interest, rent etc. which continue to be incurred in spite of the stoppage of the business due to any of the insured perils of standard fire and special perils policy.
- Loss in Respect of Wages other than those covered by the Standing Charges.
- Increased Cost of Working (these are abnormal expenses incurred by insured to maintain the business. Common examples are rent for temporary premises, payment of overtime, hire charges for machinery, sub-contracting etc)
- Auditor’s Fees
Indemnity Period: The indemnity period available under the policy is 3 months to 3 years which is as per the indemnity period chosen by the insured at time of proposal finalization.
Only essential pre-requisite of this Insurance is that there must be in force a Standard Fire & Special Perils Policy covering the business risk.