Consequential Loss
Categories: Investing, Accounting
You own a pizza parlor. A popular one, too. You’ve got the best meatball sub in town, and the line is out the door every single day from 11 am to 3 pm. Things are awesome. You’re literally rolling in dough.
But then a fire breaks out at night, and the shop burns down. Your property, fire, and casualty insurance will cover the direct loss of your pizza parlor. But this insurance policy does not cover the lost income, since this is a consequential loss of the fire.
These types of indirect losses might include payrolls, taxes, and other obligations. Any losses related to consequential loss requires a different type of insurance policy.