Loss of Profit Insurance

Loss of Profit Insurance is an additional coverage under property insurance that primarily covers the loss of expected profits and continuing fixed expenses incurred when a business is interrupted or production halts due to insured events (such as fire, explosion, natural disasters, etc.). In foreign trade, this coverage is commonly used by export enterprises, overseas warehouses, and processing trade factories. When plants, equipment, or inventory are damaged, preventing timely contract fulfillment or normal operations, the insurer compensates for gross profit loss and additional reasonable expenses as agreed. Usage scenarios include: attaching Loss of Profit Insurance to an All Risks property policy, or using it as a standalone coverage for supply chain interruption risks. Precautions: The indemnity period, deductible, and sum insured determination method (usually based on the previous year's gross profit or expected profit) must be clearly defined; it is similar to Business Interruption Insurance, but Loss of Profit Insurance focuses more on the loss of profit itself, while Business Interruption Insurance has a broader scope that may include fixed costs and extra expenses. The difference from Cargo Insurance is that Cargo Insurance only covers physical loss during goods transportation and does not cover profit loss caused by accidents. Foreign trade practitioners should reasonably choose the sum insured and indemnity period based on their own business continuity risks to avoid underinsurance.