Fire Loss of Profit Insurance

Fire Loss of Profit Insurance (FLOP)

The Consequential Loss (fire) policy covers Loss of Gross Profit and /or increase in cost of working due to reduction in turnover / output due to operation of peril covered in the Standard Fire & Special Perils Policy.

The material damage Policy indemnifies the loss to the property insured due to the operation of insured perils. Even if the coverage is adequate and the claim settled on reinstatement value basis the insured still has other losses which may ruin him. These losses are the loss of business and financial loss as the consequence of operation of the peril and at times are larger than the material damage loss.

In case of a major fire the insured that has opted for a policy on market value basis has to contribute a sizeable part of the reconstruction cost due to:

• Deduction on account of depreciation
• Under insurance if the value at risk is more than the Sum insured
• Items not covered in the policy
• Excess as applicable
• In addition to the above exclusion number 9 of Fire policy excludes “Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind or description whatsoever”. 

Benefits of the Fire Loss of Profit Insurance Policy

Clubbed with the Standard Fire and Special Perils policy, the Fire Loss of Profit Insurance Policy can offer total protection from losses occurring due to any perils covered including fire damage, flood etc. The benefits of the Policy are as follows –

• Protection from loss of net trading profit.
• Standing charges.
• Protection from loss of wages.
• Auditor fees are covered by the insurance policy.
• Increased cost of working.

The policy also offers EXTENSIONS that can cover the following –

• Accidental failure of public electricity / gas / water supply
• Damage to customer's premises due to perils covered under Fire Policy
• Damage to Supplier's premises due to perils covered under Fire Policy

Sum Insured and Premium

The Fire Loss of Profit Insurance Policy covers the gross profit of the indemnity period selected. This indemnity period is the maximum period required to put the business back into normal operation after damage to insured property by an insured peril and can vary from 6 months to 3 years.

For indemnity periods up to one year, the annual gross profit should be selected as sum insured.

The premium on a Fire Loss of Profit Insurance Policy depends on the annual gross profit, the chosen indemnity period and any selected extensions.

Exclusions to the Fire Loss of Profit Insurance Policy

• Loss of gross profit due to a peril not covered under the Fire policy
• Difference between the value of stock at the time of fire and at the time of subsequent replacement
• Deterioration of undamaged stock after fire
• Cost of documentation for Fire and Loss of Profits claim
• Loss of goodwill
• Third party claims
• Other exclusions stated on the policy

We also offer a Mega Policy

Large scale, multinational business need to manage risks at an even larger scale, which is why we also offer a Mega Policy. This is a Risk Management policy that protects and covers property related risks where the sum insured is more than Rs.2500 crores at a single location. This policy is generally structured as a package policy as per the clients’ requirements.