Sometimes a claim not only causes direct damage, but also future economic losses or damages. This is lost profits, and it is essential to know what lost profits is.
It is important to have a good insurance that covers, in addition to the consequential damage, the loss of earnings. To do this, it is best to have the services of a good insurance advisory.
This is the case of Euroteide Insurance, an advice from Insurance located in Tenerife which, making its more than 25 years of experience in the sector available to the client, will know how to find the product that perfectly adapts to the needs and requirements of the insured. Euroteide Insurance sells all types of Insurance, from Health insurances but also Insurance Policies for the Self-Employed .
What is lost profits
Loss of profit refers to the gain or loss of capital gain that a person ceases to perceive as a result of the breach, action, omission or damage caused by a third party.
Loss of profit, as a loss of profit, It can occur at the time the damage occurs, but it can also occur in the future, in the form of future consequences or sequelae. For example, in the event that a taxi driver burns his car, the loss of earnings will consist of the earnings that the taxi driver would have ceased to receive due to not being able to use the taxi to work. However, in this case there is also a loss of profit that will consist of the loss of work capacity as the taxi needs a repair that will be extended over time, causing losses not only in the present, but also in the future.
Es important to know how to differentiate it from emerging damage. While the loss of earnings consists of the loss of opportunity or economic gain as a result of damage, the consequential damage will consist of the damage suffered directly. That is: the consequential damage refers to the damage produced in a good, its value being that of the cost of its replacement. For example, in the event that a fire has occurred in a company, consequential damage will result from material damage that had occurred, such as the loss of furniture or merchandise due to fire. On the contrary, the lost profit will be the economic profit that the company has stopped receiving due to not being able to continue production as a result of the damage caused by the fire.
Characteristics of the Loss Profit Insurance
In order to claim the loss of earnings, it is necessary that it meets some fundamental requirements which, in addition, are usually agreed with the insurer in the Loss of Profit Insurance policy. These requirements are as follows:
- The existence of lost profits must be proven: it is essential that there is loss of profit and that it can be proven.
- The amount of lost profits claimed must be determined: it is essential that the exact amount of lost profits be determined. This can be complicated, since it is really difficult to estimate what has been lost as a result of the damage caused. In any case, the interested party or claimant of lost profits can use evidence such as accounting documents, tax returns or expert reports, among others. It will be the competent judge or arbitrator who will determine the exact amount to which the lost profit amounts.
- The existence of a causal link between lost profits and damage must be proven: it is essential that the loss of profit is the consequence of the damage caused by a third party, so a causal relationship must be proven between the damage caused and the loss of potential income.
What is the coverage of this Insurance
Loss of Profit Insurance It is a type of insurance policy by virtue of which the insurance company is obliged to compensate the insured for lost profits, that is to say, due to the loss of economic profit as a consequence of a claim or damage —usually, the damage or claim is usually agreed upon in the insurance contract. This Insurance, although its coverage depends on the policy that has been agreed, usually includes the following coverages:
- Loss of benefits that are a consequence of the loss or damage caused within the period of validity of the Insurance policy.
- The general expenses that the insured must continue to face after the damage or loss has occurred.
- Expenses that are a direct consequence of the damage or loss suffered by the insured.
Likewise, when the insured is the owner of an entity or company, they may insure the loss of profits and general expenses in those events and damages foreseen in the Insurance policy that affect the activity of the company.
It is important to take into account the delimiting clauses of the Loss of Profit Insurance contract, since they limit the risk, as well as the clauses that limit the rights of the insured. The risk delimiting clauses are perfectly legal, since they determine in what place and what is the scope of the coverage, determining what conditions must be given in the claim or damage for the insurance policy coverage to operate. In any case, the risk delimiting clauses may not exclude the risk, since, according to the jurisprudence of the Supreme Court, it would be understood that the Insurance company would not be assuming the Insurance.
However, The limiting clauses must comply with the legal provisions of the Insurance Contract Law. Thus, article 3 of the Insurance Contract Law establishes that these must be specifically accepted in writing. Likewise, the limiting clauses of the insured's rights, in order to be valid, not only must comply with the requirements in the Insurance Contract Law, but also may not come as a surprise to the insured.
Hiring a good Loss Profit Insurance is a very good option, especially for those insured who are owners of a company. However, it is essential to know how to choose the best insurance and know how to agree on the risk and the scope of its coverage.
Therefore, it is best to have the experience and good work of a good Insurance advisory, such as Euroteide Insurance, an insurance consultancy that operates in the south of Tenerife and that, with its more than 25 years of experience in the insurance sector, will know which insurance policy to recommend to each client depending on their wishes, budget and needs.