The Fire Insurance Policy only provides indemnity to the Insured in respect of loss or damage to physical assets. Any loss from a fire or a mayor natural catastrophe such earquake, storm or flood could bring about serous disuptions in the business activities of the Insured in terms of loss of production, sales and hence earnings.

A Consequential Loss Policy is aimed at providing an indemnity to the Insured to put him In the same financial situation, after a loss by an insured peril, as he would have been had the loss event not happened.

The contingencies covered by a Consequential Loss Policy generally follows the Fire Insurance Policy. Hence, ifthe Fire Insurance Policy is extended to cover additional perils, the Insured should likewise extend the Consequential Loss Policy to include the same additional perils in order to fully protect himself. There is a Material Damage Warranty in all Consequential Loss Policy. It is important that there must be insurance covering the physical assets so that in the event of a loss, there shall be funds for the replacement of assets to put the Insured in a position to recover its earning capacity.

There are a number of points which the Insured must consider in taking up a Consequential Loss Policty and these are :

This should be based on the Insured's estimate of the maximum period of interruption if a contingency insured against occurs. In deciding the Indemnity Period, it is necessary to consider the following :

THE SUMS INSURED

The indemnity provided by most Consequential Loss Policy is in respect of the loss of Gross Profit from a reduction in turnover and an increase in the costs of working from an insured peril. The sums insured will nedd to be adjusted according to the Indemnity Period selected and must take into account the trends in the business.

OTHER EXTENSIONS

The Insured's business may not only be affected by perils suffered by property insured. It may be affected by perils which occurred at the neighbouring properties. A serious loss which affected one of the Insured's customer or supplier could also affect the turnover of the Insured. Subject to detailed underwriting information and additional premiums, Underwriter will be prepared to provide the following extensions :

These are generally provided subject to a sublimit any one event. In addition, Consequential Loss Policy usually carries a time excess (the first period of interruption to be borne by the Insured).

Note: This information is for briefing purpose only. Full detail and conditions of policy cover are contained in VIA's official policy wording.