Here’s What Is Meant by a Consequential Damage in Different General Insurance Terms

General insurance is a broad category of term insurance policy where an individual can select any tangible asset of their choice and protect its economic value. People buy insurance to protect against any loss or damage to their assets that may be caused due to any unforeseen circumstances. Like any other insurance, when you buy general insurance, you pay premiums for the cover you receive.

With most types of general insurance, you will hear the term ‘consequential damage’. Without having clarity, it is easy to misunderstand its meaning and may cause problems during claims.

Meaning of consequential damage

Consequential damage in simple terms means any damage that is caused unexpectedly from an unforeseen event. It is a series of events that happened due to the first event and resulted in damages.

It can be tricky to understand consequential damage. Here are some examples from a few types of insurance reflecting what consequential damage looks like in different scenarios-

  • The consequential damage of your business property

Suppose you have an office and you have insured your office as well as the contents of it. In case of an unforeseen event, where your office is flooded, you will raise a claim for damages with the insurance company. Your insurance company will likely cover the damages of your office and its contents. However, during the flooding and the entire claim process, you will lose some days of your business. This loss in business is a consequential loss that occurred due to the flooding of the office. *

  • The consequential damage during your travel

Say, you travel often for business and have taken travel insurance that covers components like missing your flight. On one of your trips, you missed your flight and had an important meeting. Regarding the travel cover, you keep your insurance company in the loop. Later, you receive the insurance claim from your insurer of your missed flight. However, when you missed the flight, you also missed an important meeting with a potential client. This may result in an unexpected loss in your business. Here losing a client is consequential damage that was caused due to missing a flight. *

  • The consequential damage of your vehicle

Imagine that you are travelling to work and suddenly hear a problem with the engine. Worried, you stop your car immediately and check. While you are checking your car, it rains heavily and causes problems with your engine as water seeps in. While the basic repairs and damages of your car will be covered under your insurance. However, engine damage that is caused due to hydrostatic loss is a consequential loss and will not be covered. This is a common type of consequential damage that often occurs in the monsoon. *

* Standard T&C Apply

Consequential losses are indirect results of unexpected damage/loss caused to the asset insured. When you are buying the different types of general insurance, ensure that you read the fine print to know what direct and indirect damages of the asset insured are covered.

Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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