Loss of profit
Loss of profit or loss of earnings is perhaps the coverage that truly guarantees a company’s continuity and viability. In many cases, the interruption is even more damaging than the incident itself.
What would happen if a company’s production was halted by a fire in key machinery?
The actual fire could be put out in a matter of hours and the cost of replacement may not be all that high. However, replacing and refitting the machine could take up to 30 days, during which time we would be in shutdown.
The immediate effect is a decrease in sales which leads to pressure on the cash flow to meet the fixed costs which, despite the stoppage, have not gone away. At the same time, net profit is also reduced.
For this reason, it is critical to analyse on a case-by-case basis the risk to which you are exposed and the economic damage it may cause.
Reasons why a business interruption may occur:
- Basic Warranties (Fire, Lightning and Explosion)
- Extended Warranties (Atmospheric, Vandalism, Vehicle Impact)
- Electric Damage
- Key Machinery Breakdown
- Inability to access
- Lack of supply
- Claims by Suppliers or Customers