When a property used for a business is damaged by an insured peril, the regular business activities are interrupted causing a serious financial loss in terms of “Loss of Profit” which is not covered by a regular Fire policy.
The purpose of taking business interruption cover is to protect a business against shortfall in sales following an insured loss such as fire or storm etc. It will pay for ongoing costs such as lease of the business premises, payroll and mortgage, as well as covering loss of profits. In effect, the insurer takes the place of business’s customers, making up the resulting loss of gross profit caused by a shortage of turnover. Interestingly, it is known in many forms. In insurance parlance, it is often called “consequential Loss insurance” or “Loss of Profits Insurance” etc.