Consequential Loss (Fire) Insurance Policy Online

Consequential loss means any interruption in the business operations caused by fire, resulting in different types of other financial loss. A consequential loss (fire) insurance policy covers various types of lost business income due to fire. Find out everything about this insurance policy in the below article.

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Significance of Consequential Loss (Fire) Insurance Policy

A fire incident in a business site can not only damage the goods and machinery but also impact the overall business operations. This insurance policy covers several damages, including-

  • Loss of gross profit
  • Net trading profit
  • Standing charges
  • Loss of wages to the workers

Coverage of Consequential Loss (Fire) Insurance Policy

This insurance policy offers financial coverage against various kinds of business losses due to fire. Some of them are below-

  1. Loss of gross profit due to fire leading to a reduction in business turnover
  2. Loss of net trading profit
  3. Standing charges
  4. Spoilage consequential loss
  5. Worker layoffs and retrenchment compensation
  6. Auditor's fee

How Does This Insurance Policy Work?

In case of any fire mishap resulting in a loss in income or revenue of the business is covered under this policy. As a policyholder, you should instantly call your insurance provider and register your claim.

Your insurer will consider annual gross profit, extensions or add-on covers, and indemnity period to calculate the premium.

To evaluate the loss or damage to the business, a licensed surveyor is appointed by your insurance provider. The surveyor will prepare the Final Survey Report (FSR).

According to the FSR submitted by the appointed surveyor, the company will compensate for the consequential loss incurred to the business. However, it is advised to read the terms & conditions of the insurance policy before buying the policy.

Why Should You Obtain Consequential Loss (Fire) Insurance Policy?

The policy has certain advantages against those out-of-control circumstances that can ravage their property and business function. Here is a list of benefits associated with consequential loss insurance-

  • It financially covers the turnover loss due to an instance of fire on the business premises
  • It compensates the business employees due to layoff or retrenchment
  • It also covers the gross profit and fixed costs when the business was not operating
  • It reimburses the miscellaneous expenses incurred to sustain normal business activity during the period when business was affected
  • It also covers the perils that may arise due to the non-usage of the business premise to deliver products or services
  • It also has an option to enhance the coverage by opting for add-on covers. It covers power failures or the incapacity to use any public utilities after the massive fire destruction in the insured property.

Things to Keep in Mind Before

Here are a few things that you must keep in mind before purchasing the policy-

  • The business should go through the policy wordings, exclusions, and claim settlement process of the insurer before choosing the plan
  • To avail an adequate sum insured, the project projection must be one year beyond the indemnity period. It will be beneficial if the mishap happens at the end of the policy term
  • This plan is suitable for all SMEs and businesses who need protection against various uncontrollable situations.


Certain conditions are not covered by this policy. Here is a list of general exclusions-

  • Any loss of gross profit caused due to fire is not covered in the policy. Also, it has caused damage to the business property
  • Any loss caused to the business property due to material damage
  • Any third-party liabilities generated out of the unforeseen events and causing loss of goodwill
  • Any claim raised due to invasion, war, and the act of a foreign enemy.

In a Nutshell

Your standard fire insurance policy only protects against physical damages to the property. However, when the damaged property is being repaired or replaced, it hampers the business's functioning. That is why this insurance policy is significant for those businesses. It covers all the loss of profits due to a reduction in turnover. Hence, it protects your business from those unforeseen situations.

Written By: PolicyBazaar - Updated: 05 August 2022