What is Fire Loss of Profit Insurance ?
Fire Standard & Special Perils Policy covers only the material damage financial loss caused to your property covered under the Policy by Fire or by any of the Special Perils covered under the Policy like Flood, Storm or by Riot, Strike & Malicious Damage. But due to this, your Business enterprise, be it a shop or godown or industrial unit etc may have to suspend its normal business activities thus causing reduction in your turnover or you may have to incur certain additional expenditure for keeping normal operation of your business activity maintained. These Consequential losses are NOT covered under Fire Standard & Special Perils Policy.

Fire Loss of Profit Insurance tends to address this important business requirements. It 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. Only essential pre-requisite of this Insurance is that there must be in force a Standard Fire & Special Perils Policy covering the risk.

What is the benefit of this Insurance?
This insurance together with Standard Fire & Special Perils Insurance provides you total protection against operation of any of the perils covered; be it a Fire damage or a Flood/Inundation damage etc. Even if the Fire Material Damage 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:

a] Deduction on account of depreciation
b] Under insurance if the value at risk is more than the Sum insured
c] Items not covered in the policy
d] Excess as applicable
e] 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”.


Fire Loss of Profit Insurance gives you total protection against all these losses not payable otherwise under a Standard Fire Material Damage Insurance. Coverage under this Insurance includes

• Loss of Net Trading Profit
• Standing Charges
• Loss in Respect of Wages other than those covered by the Standing Charges
• Increased Cost of Working and Auditor’s Fees.

Who is it for?
Any business enterprise can have this insurance in addition to Standard Fire Material Damage Insurance and enjoy benefit of total insurance protection against any perils covered. Present day, it is considered as necessary as Motor or Health Insurance.

Approximate cost of this Insurance?
Though dependent on various factors affecting the risks as well as Sum Insured selected, a very rough idea is given. For a shop with Rs.10 lacs Fire Loss of Profit Insurance, premium can be as low as Rs.1600/- only.

Claim procedure of this Insurance?
Maintenance of books of accounts normally required is a must for assessing any business interruption loss due to Fire & allied perils. Furthermore, for admitting any claim under Fire Loss of Profit Insurance, it is a pre-requisite that the material damage claim for the said loss event is admitted under Standard Fire & Special Perils insurance.

Fire Loss of Profit (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”.

Hence the need for Business Interruption Insurance or Fire Loss of Profit Policy

It is very important to select the correct Period, Sum Insured and excess after understanding the cover and due deliberation and debate.

Coverages Includes
• Loss of Net Trading Profit
• Standing Charges
• Loss in Respect of Wages other than those covered by the Standing Charges
• Increased Cost of Working
• Auditor’s Fees