Consequential Loss (Fire) Insurance Policy

Safeguard Your Business from Operational Interruptions

For a business, even a temporary halt in operations can result in significant financial setbacks, including loss of revenue, increased operating costs, and other hefty damages. Unlike traditional fire insurance, which covers the physical damage to property, a consequential loss (fire) insurance policy offers additional support to cover the loss of income and extra expenses incurred as a result of a fire.

As an IRDAI-licensed insurance broker, Arrowhead helps you compare and choose the best insurance plans from a wide selection of industry-leading providers through strategic comparison. Thus with the right policy, businesses can recover more quickly from the financial impact of fire damage, ensuring a smoother transition back to normal operations.

Benefits of Consequential Loss (Fire) Insurance Policy

Some of the benefits of a consequential loss (fire) insurance policy are as follows:

Protecting Income
The highlight of this policy is it offers protection against the loss of income due to a fire. If your business operations are interrupted after a disaster, the insurance compensates for the revenue you would have earned during the downtime. This helps maintain cash flow and keeps the business financially stable while your insurance takes care of the rest.

Covers Additional Expenses
In addition to covering the loss of income, this policy can allow reimbursement to businesses for the additional expenses incurred during the fire. This includes the cost of renting temporary premises, overtime expenses for employees, or the cost of shipping for critical supplies, etc.
Thus, by covering these extra expenses, the policy helps businesses reduce disruptions and maintain operations as best as possible.

Prevents Interruption in Business Operation
A fire can completely disrupt a business’s operations, affecting everything from manufacturing processes to customer deliveries. This extensive policy ensures that businesses can continue operating in a limited capacity or maintain financial stability while their damages are being repaired.
This policy is crucial for businesses that rely on continuous operations, such as manufacturers, retailers, or service providers.

Involves Flexible Cover Period
This kind of policy typically covers the period of restoration, which is the time it takes to repair or replace damaged assets and get the business back up and running. You can choose the coverage period based on your specific business needs and the expected time required to restore operations, ensuring that you’re adequately covered throughout the recovery process.

How to Choose the Best Consequential Loss (Fire) Insurance Policy?

Let’s delve into the factors to consider before buying a suitable consequential loss (fire) insurance policy:

Understand the Extent of Coverage
A comprehensive policy should not only cover income loss but also additional expenses, such as rent for temporary premises, wages, and operational costs incurred while the business is being restored. Moreover, ensure the policy covers a wide range of both direct and indirect losses, including fire, explosion, lightning, and other related risks.

Assessment of Business Size and Potential Risks
The first step in selecting the right policy is to assess the size of the business and its risk exposure. For example, the larger the manufacturing facilities with complex machinery the greater the significant disruptions it will face in the event of a fire as compared to a smaller retail store.
Moreover, understanding the scale of potential losses and the financial impact of operational tenure will help you determine the appropriate level of coverage.

Choose the Right Indemnity Period
The warranty or indemnity period refers to the length of time for which you will be covered for loss of income by the insurer. It’s important to choose this period that reflects how long it will take to repair or rebuild your premises. In addition to this, it is crucial to note that some businesses may need a longer warranty period if they rely on specialised machinery or have a longer recovery time.

Review the Policy Exclusions
Like any other insurance policy, this policy too comes with exclusions. Some of the common exclusions may include damage caused by natural disasters, terrorism, or intentional acts. Hence, to stay prepared with the amount of self-liabilities from the beginning, go through the terms carefully and ensure that you understand what is not covered by the policy.

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Consequential Loss (Fire) Insurance Policy