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Consequential Loss

Consequential Loss

A consequential loss is an indirect adverse impact brought about by damage to business property or equipment. A business owner might purchase insurance to cover any damage to property and equipment, and may likewise get coverage for secondary losses. A consequential loss policy or clause will remunerate the owner for this lost business income.

This type of insurance is additionally called business interruption or business income insurance.

Figuring out Consequential Loss

Business owners regularly acquire casualty insurance to cover any damage to their facilities or equipment brought about by theft, fire, flood, or other natural catastrophes. These direct coverage policies don't remunerate the owner for income that is lost due to the business' failure to utilize that property or equipment.

Indirect losses that are the aftereffect of physical damage and adversely influence normal business operations might be viewed as consequential losses.

Coverage of consequential losses might incorporate compensation for continuous obligations like salaries and fixed operational expenses.

In this way, insurers recognize two types of damage: primary or direct damage, like destruction by fire, and indirect or consequential loss, for example, an end of business due to the fire.

Illustration of Consequential Loss Coverage

For instance, a cyclone obliterated a Portland, Michigan, Goodwill store a long time back. The association's property insurance covered the damage to the physical structure and the loss of the store's inventory, while separate coverage repaid it for the loss of business revenue that originated from the impermanent closure of the store.

Losses connecting with income are consequential and require separate coverage.

Insurance Policies for Consequential Losses

Business interruption insurance, otherwise called business income insurance, covers consequential losses. These policies remunerate a business for loss of revenue after a catastrophic event paying little heed to physical damage to the property or equipment.

Interruption insurance coverage will commonly start from the hour of the adverse event and go on until the business can return to its normal operation.

Consequential loss coverage repays the insured for business costs due to damaged facilities or equipment.

For instance, business interruption insurance can cover circumstances that outcome when the loss of revenue happens due to events like an extended power blackout, a flood, or a landslide.

Business interruption insurance can likewise safeguard against loss of income during a breach of contract dispute that prompts an impermanent end of business, like a dispute with a provider or other outsider.

Requirements for Coverage

Business interruption insurance is hazard explicit and frequently must be purchased separately.

Insurance companies are watching out for claims that show swelled expectations. For instance, a pastry shop closed briefly for repairs after a fire could put in a claim for reimbursement of a reasonable level of lost sales, however not for losses that fiercely surpass its standard numbers.

However insurance might be available for different circumstances, just certain types are required. Numerous businesses might hold general liability insurance policies to safeguard themselves from costs connecting with mishaps, wounds, or negligence.


  • These must be insured separately from the policy that covers physical damage to facilities or equipment.
  • Such policies cover losses due to business interruptions.
  • Consequential losses are the indirect aftereffects of property damage.