Consequential Loss

Definition - What does Consequential Loss mean?

A consequential loss is a loss occurring as the result of a business being unable to function normally due to damage to equipment or property or another peril. In other words, it is an indirect loss. Property insurance typically covers primary damage to a building or structure. However, it may not cover losses in sales or revenue that occur as a consequence of the initial damage.

Insuranceopedia explains Consequential Loss

Consequential losses can result in substantial amounts of lost revenue. For example, if a tornado damages a flower shop, the owners would most likely lose revenue due to the fact that the building needs repairs.

Insurance policies do exist to cover consequential losses however. Business owners can purchase consequential loss policies to protect against such perils. These types of policies are often sold together with other forms of standard business and property insurance.

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