Consequential losses can occur to businesses in Idaho as an indirect result of property damage. Sometimes called secondary loss, policy coverage for consequential losses are not part of standard business insurance policies that cover damage to property and equipment. Owners must buy a separate policy or add a clause to their primary business policy.
Consequential loss versus direct loss
Regular casualty insurance covers damage to a business’s equipment and facilities caused by theft, fire and various natural disasters. Indirect losses resulting from physical damage that adversely affects operations are consequential losses. Standard policies do not cover loss of business income or cessation of business due to incidents that cause direct losses. A consequential loss policy or clause can include payments for ongoing obligations like salaries and operational expenses.
Business interruption insurance covers consequential losses like loss of revenue after a catastrophic event, regardless of any damage to physical property or equipment. It can also protect against income loss during a breach of contract dispute with a supplier or another party. The clause or policy will typically cover loss of income from when the incident occurred until the business can return to normal operations.
Ensuring you have all bases covered
Sometimes new business owners believe the only type of insurance coverage they need is property liability. However, business owners often need other types of coverage, including workers’ compensation, business interruption, professional liability, etc., depending on the nature of the operation. Operating without such protection can lead to unexpected problems.
Developing a sound business plan before you begin operations includes determining what type of insurance you need. Take sufficient time to build your plan and determine all aspects of operation, including your insurance needs. Having the necessary policies can make the difference between a successful business and one that fails.