Scope of Cover:
The Consequential Loss Policy (Business Interruption Policy) offers indemnity against loss of Gross Profit which is nothing but the sum of Net Profit and Standing Charges as a result of the loss of production caused by accident which is covered under the Material Damage Policy. Apart from covering loss of gross profit, it also covers Increased Cost of Working which relates to the expenses incurred for reducing or minimizing the reduction in turnover, but not any more than the loss that was purportedly avoided
This policy is always issued in conjunction with fire policy. The loss under this Policy is indemnifiable only when loss under MB policy is admitted.
Basis of Claim Settlement:
The indemnity to be paid to the insured is arrived at by comparing the production achieved during the preceding financial year. The policy provides for computation of a standard rate of gross profit (gross profit earned per turnover). This rate of GP when multiplied by the loss in production due to the loss derives the loss payable to the insured.