Fire Loss of Profit (FLOP) Insurance

What is FLOP Insurance?

FLOP Insurance doesn't cover the physical loss or damage caused by fire (that's covered under a Standard Fire & Special Perils Policy). Instead, it covers the financial impact of that loss — the profits you would have earned during the downtime.

Coverage Includes:

• Loss of Gross Profit: Due to reduced turnover or halted operations.
• Increased Cost of Working (ICOW): Extra expenses incurred to maintain business operations (e.g., renting temporary premises, outsourcing production).
• Fixed Standing Charges: Recurring business expenses like rent, salaries, electricity, etc.

What It Does NOT Cover:

• Material damage (covered by Fire policy)
• Losses due to market conditions
• Loss due to delay beyond the indemnity period
• Voluntary shutdowns

Requirements for FLOP Insurance:

• Must be linked to a valid Fire Insurance Policy.
• Accurate financial records (P&L statements, turnover, etc.).
• Proper estimation of gross profits and fixed costs.

Suitable For:

• Manufacturing units
• Warehouses
• Hotels & Restaurants
• Retail outlets
• Any revenue-generating commercial setup

Example:

A factory burns down and takes 6 months to rebuild. During this time:

• It loses ₹50 lakhs in gross profit.
• Spends ₹10 lakhs on alternate facilities.
• Fixed expenses (like rent, staff salaries) are ₹20 lakhs.
• Total claim = ₹80 lakhs, if covered under a FLOP policy.