Whilst the material damage Fire Policy provides protection and compensation to an Insured against physical loss or damage to the property, it does not provide any protection against the "after effects" of such loss; namely, the loss or reduction of the ability of the Insured to maintain business at its pre-damage level due to the fact that his buildings and/or machinery have been lost or damaged, thus restricting or possibly halting the operations of the company.
The Fire Consequential Loss policy covers loss of Gross Profit following an indemnifiable peril (the perils usually follow that of the Fire policy) and is measured on the reduction in turnover compared to the same period in the last twelve months and applying the Rate of Gross Profit. Cover also extends to include Additional Expenditure reasonably incurred to minimise the loss of Gross Profit. The costs of non productive wages can be included either as treating them as a standing charge, or taking out more specific covers such as Dual Wages. Professional accountants' charges to produce certified details for the Insured's presentation of a claim could be included.
- Gross Profit
- Wages/ Salaries
- Auditors' Fees
The indemnity period is the maximum period during which the policy is to provide an indemnity following any damage and is selected by the policyholder. It should be sufficient to allow for the premises to be rebuilt and re-equipped and for the premises to be restored fully to normal conditions in every way. The indemnity period of 6 months, 12 months, 18 months, and 24 months or higher can be selected.
Rate applicable on Fire Consequential Loss follows rate of the Fire Insurance.
Sum Insured of interest insured and the indemnity period selected are the major factors affecting premium costs.