Loss of profits insurance for commercial premises

If you run a bar, restaurant, shop or any other business premises in Marbella, you probably already know that August is your golden month. The Costa del Sol fills up, the tills ring and the hard work of the whole year finally pays off. But what happens if, right at that moment, you suffer a claim and have to close for three weeks? Loss of profits cover in a commercial insurance policy is the guarantee that very few people take out… until they need it.

What is loss of profits cover in a commercial insurance policy?

Loss of profits — also known as consequential loss or loss of income — is the cover that compensates you for the revenue you stop earning whilst your business is closed due to an insured event (fire, flooding, serious damage, etc.).

Bear in mind that it is not enough to have the cost of refurbishing your premises or replacing damaged equipment covered. Whilst the business remains closed, money keeps going out: the rent does not stop, employees still receive their wages, and utility bills keep arriving even if you are not serving a single coffee.

Without this cover, you have to meet all those costs out of your own pocket without bringing in a single euro. You can explore key terms like this one in the Segurmar insurance glossary, which is very useful if you want to fully understand your policy before signing it.

A real example: three weeks closed in August in Marbella

Imagine you own a restaurant in the centre of Marbella. At the beginning of August, a short circuit occurs in the kitchen, a fire breaks out, and you need three weeks to repair the installation and reopen.

During those three weeks:

• You pay €3,000 in rent for premises you cannot use.
• You pay the wages of four members of staff, around €6,000 in total.
• You receive electricity, water and other utility bills totalling around €800.
• You lose an estimated average turnover of €30,000 in sales.

A standard commercial insurance policy will cover the material damage — the burnt-out kitchen and the refurbishment — but without loss of profits cover, nobody reimburses you for the income you have lost or the fixed costs you have continued to bear.

Daily indemnity vs. indemnity period: the difference that matters

When you take out this cover, there are two concepts you need to understand clearly to avoid any unwelcome surprises:

Daily indemnity: this is the fixed amount the insurer pays you for each day your business is closed. For example, €500 per day. It is usually calculated on the basis of your declared average income.

Indemnity period: this is the maximum length of time for which the insurer covers that loss. It may be 30, 60, 90 days or more, depending on what you have arranged. If the closure extends beyond that period, the remainder falls to you.

It is therefore essential to calibrate both parameters carefully to reflect the reality of your business, particularly if your trade is highly seasonal on the Costa del Sol.

Many standard policies do not include this cover

Here is the most important warning we can give you: the majority of standard commercial insurance policies do not include loss of profits cover. It is an additional guarantee that must be specifically arranged or added as an extension to your policy.

Many hospitality and retail businesses in Marbella only discover this gap when they make a claim. By then, it is already too late.

Moreover, loss of profits is not the only cover that tends to be missing from standard policies. If you provide services to clients or suppliers, it is also worth checking whether your policy includes public liability cover — another area that is frequently underestimated in insurance for small retail and hospitality businesses, and one where the limits arranged may be incorrect, or where certain types of liability cover required for a particular activity may simply be absent.

What should you check in your current policy?

• Is loss of profits or consequential loss cover included?
• What is the agreed daily indemnity, and does it genuinely cover your fixed costs?
• How many days does the maximum indemnity period last?
• Which insured events trigger this cover? Fire only, or also water damage, theft, and so on?
• Do you need to declare your average income for the cover to be proportionate?
• Is there a time excess (waiting period) before you start receiving payments?