Loss of Profits insurance, also known as Loss of Profits, aims to leave the company in the same economic situation that it would have obtained in the absence of the claim of material damage. To achieve this purpose, the insurance company will indemnify both the benefit it no longer obtains due to the accident, as well as the permanent expenses of the business.
Usually, the Loss of Profits is contracted as an additional guarantee to a damage insurance. Even so, it can be hired as an autonomous and independent insurance. What is important to know is that the coverage contracted by this insurance is conditional on a triggering event initiating a freeze or decrease in the company’s sales. This triggering event can be a fire, electrical damage, damage covered by the Insurance Compensation Consortium, damage agreed and suffered by the insured, a third party, customer or supplier.
In determining the insured capital, account shall be taken of the turnover of the insured undertaking in the annual period immediately preceding that in which the insurance cover was taken out. It is therefore important to bear in mind the evolution of the company in order to avoid the application of the rule of proportional under-insurance if it ends up guaranteeing a lower capital than real. There is the option to contract an adjustment clause that gives flexibility to the insured capital by a percentage higher and/or lower than the contracted amount.
In addition to the coverage of the company’s fixed costs and profits, the risks of premises of major suppliers or customers that may affect the insured company’s turnover can also be covered. The lack of supplies such as electricity, water, gas,... And you can also ensure the fact that it is impossible to access the premises of the insured company with what prevents production.