When it comes to insuring business profits, there are many ways to do it via a whole catalogue of seemingly identical insurance policies all with very different names.
You will most readily come across the following terms:
- Business Interruption
- Increased Cost of Working
- Consequential Loss
- Loss of Profits
- Loss of Income
- Loss of Revenue
The exact definition of the above policies will differ from insurer to insurer though some are just older historical names that have now been replaced.
It is a bit strange however that in today’s insurance markets generally every term used has to be defined clearly and here we have several terms that appear to mean the same thing.
Where possible then I’ve tried to break down some of these…
Business Interruption
This would normally cover loss of Gross Profit following a reduction in Turnover resulting from, and occurring after, damage to an Insured property.
The Gross Profit indemnity enables a business to pay its fixed standing charges including payroll and recover its net profit during the Indemnity Period.
The Indemnity Period is selected by the policyholder and represents the period that it is believed will be required to return the business profit to normal following a loss.
These periods are normally 12, 18, 24 and 36 months.
Increased Cost of Working
Business Interruption policies also cover Increased Cost of Working: this may involve something like renting alternative premises whilst repairs are undertaken on the insured premises. This extension would be limited so that the costs incurred did not exceed the amount of loss that they were avoiding.
Extensions are also available to provide protection in the event of damage to customers or suppliers premises.
Consequential Loss
It would seem that this is the term that was used prior to Business Interruption becoming common place and has real no definition of its own.
This therefore leaves Loss of Profits, Loss of Income and Loss of Revenue which when researched all seem to offer the same cover as the other 3 but just have different titles.
So, I am now thinking that these must also be prior versions of Business Interruption.
Their titles would suggest that they all provide the same basic cover, possibly just with different terminology.
It seems that these duplicates are not uncommon in insurance but it would be very interesting to know how some of these evolved and when they were replaced with different names.
Do you know or have experience of these types of insurance? Get in touch via the comments!
{ 0 comments }
