Consequential Loss

What is a 'Consequential Loss'

The amount of loss incurred as a result of being unable to use business property or equipment. If the property/equipment is damaged through a natural disaster or accident, only certain types of insurance can cover the owner for lost business income.


Consequential loss is considered an indirect loss (as compared to losses from the direct damage). Direct damages would be covered under different types of insurance, such as property/casual or fire insurance, but the firm still incurs the costs of lost operations.

BREAKING DOWN 'Consequential Loss'

Say, for example, that a major storm causes some property damage to a storefront. The business owner's property/casualty insurance may cover the amount needed to replace the property, but what about the lost revenue while the store is closed? All of the owner's fixed costs such as rent continue, but there's no money coming in. These are consequential losses, and can be covered under business interruption insurance, of which there are several types.


Insurance to compensate for consequential losses can also cover situations where no direct damage is done to property, but loss of revenue occurs because of things like a power outage or breach of contract from a supplier or business partner.

RELATED TERMS
  1. Hazard Insurance

    Insurance that protects a property owner against damage caused ...
  2. Use and Occupancy Insurance – U&O

    A type of insurance that covers against the loss of use of machinery ...
  3. Fire Insurance

    Insurance that is used to cover damage to a property caused by ...
  4. Extra Expense Insurance

    Insurance coverage that provides funds for reasonable and necessary ...
  5. Gross Profits Insurance

    A type of business interruption insurance that provides funds ...
  6. Business Income Coverage Form

    An insurance policy that covers a company's loss of income due ...
Related Articles
  1. Personal Finance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  2. Personal Finance

    The Importance Of Property Insurance

    Property insurance is important, but there's a lot you need to learn in order to get the proper coverage.
  3. Personal Finance

    Do You Need Casualty Insurance?

    Find out how different types of coverages can protect you and which policy is right for you.
  4. Personal Finance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  5. Personal Finance

    Cut Taxes By Reporting Property Damage

    Know the options you have for your insured property if and when a disaster strikes.
  6. Personal Finance

    Deducting Disaster: Casualty And Theft Losses

    If you've been a victim, your losses may be deductible. Find out how.
  7. Personal Finance

    The Best Way to Insure Your Jewelry

    What you need to know to keep those baubles, bangles and beads safe.
  8. Personal Finance

    A Quick Guide To Landlord Insurance

    ...And why landlords need it, even if they also have homeowners insurance.
  9. Financial Advisor

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  10. Personal Finance

    Cover Your Company With Liability Insurance

    Every business is susceptible to legal action. Find out how to protect yours.
RELATED FAQS
  1. Does renters insurance cover water damage?

    Learn how renters insurance provides personal property coverage for items damaged by water only if the water is the result ... Read Answer >>
  2. Suppose my garage collapsed onto my car. Are damages covered by my home insurance ...

    Generally, damage to an automobile will be covered by comprehensive car insurance, which is in addition to collision coverage ... Read Answer >>
  3. What are some examples of unexpected exclusions in a home insurance policy?

    Learn about commonly excluded perils with different standard insurance policies. Explore events that homeowners should consider ... Read Answer >>
  4. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  5. What's the difference between renter's insurance and homeowner's insurance?

    Renters insurance and homeowners insurance offer similar benefits for occupants and homeowners, but in different ways and ... Read Answer >>
  6. Does homeowners insurance cover tree damage?

    Discover how damage to a home from fallen trees is covered under your homeowners insurance policy if it happens suddenly ... Read Answer >>
Trading Center