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Friday, July 19, 2024

Consequential Damages in Insurance

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A notion that has always puzzled and worried us and is the source of much anguish during claims, mostly because the idea is not well understood by many. So we’re going back to fundamentals, and this time we’re going to focus on the elephant that’s in the room. What exactly is Consequential Damage or Loss?

Consequential Damages in Insurance

In essence, consequential damages occur whenever one unanticipated incident triggers a chain of circumstances that cause damage that wasn’t caused by the initial unexpected circumstance.

Consequential Damages include those that occur as a result of an activity over which you have no power. In most circumstances, harm caused by an accident is insured by an insurance contract, but consequential harm done by preventable conduct is just not.

Here’s an illustration. Consequential Damages in auto insurance are better defined using the scenario of a Hydrostatic Lock. Assume you go on a family vacation in your vehicle during monsoon season. Sadly, heavy rain falls, causing floods. Your automobile is completely buried in flood. If you run the engines in this circumstance, it may incur a hydrostatic lock and inflict harm.

In this case, the damage is attributed largely to engine revving rather than water. Thus, while damages caused by flooding may be protected by your car insurance policy, harm caused by revving the car’s engine while immersed in the water beneath the water will be classified as consequential loss and is not protected until an add-on cover is purchased or else stipulated in the policy paper.

Claims under Consequential Damages

Engine loss is not the natural consequence of water, as stated previously. It is an unintended consequence of the engine cranking when immersed underwater, which may have been prevented. It makes no difference if the action was undertaken by error, accident, or on purpose whenever it came to demanding payment. What counts is how well the position paper addresses such a circumstance.

When making a claim, review your policy paperwork to see if specific damages are insured. If you are unsure, contact the insurer’s Customer Service staff before proceeding with the claims. If you are worried about certain eventualities, you may buy add-on insurance when purchasing or extending your insurance. Hydrostatic Lock, for instance, can be covered by buying an Engine Protection Add-on together with a Complete Auto Insurance policy.


Here seem to be three crucial points to remember from this post.

  • Consequential Damage/Loss is frequently caused by an incidental occurrence that does not have insurance coverage.
  • The majority of claims for Consequential Damage/Loss would be denied.
  • In some situations, you may be able to supplement your insurance coverage using appropriate add-ons to cover some Consequential Damage/Loss.
  • Because a Third-party Liability Policy would not pay for damage to the insured automobile, it does not compensate for associated Consequential Damages and Losses.
  • There are several instances of Consequential Damages and Consequential Losses. As a result, they can never be displayed. Nevertheless, if your insurance covers Consequential Damages and Losses, such cases must be included in the policy paper.

Also Read: Top Up Insurance Plans and Their Benefits

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