A Fire policy protects the material assets of a business, so that they may be maintained intact in the event of a loss. However, it will take time for the business to recover to its previous level, and during such time the earnings of the business will be reduced.
From these reduced earnings certain standing charges may still have to be met, and additional expenses incurred in getting the business back into operation. These additional costs and loss of earnings may be covered by a Consequential Loss policy, which is an essential complement to a Fire policy for complete protection.
The basic principle of Consequential Loss insurance is to indemnify the Insured so that he shall be in the same position after a fire as he would have been had the fire not occured. The Policy will pay the loss of Gross Profit and any additional expenses incurred in preventing more serious loss.
The standard Consequential Loss policy provides cover against the same perils as the standard Fire policy.