What Types of Financial Consequences of Loss Are There in Insurance?

As we all know by now, insurance companies are notorious for making special terms that only apply to them, as is the entire insurance world at large. As a consumer it is important that you are familiar with these terms for when you are applying for insurance coverage. One very important term is the "financial consequences of loss" as it defines what type of loss that you incurred. Here are three different types of financial consequence of loss:

Reduction in Value of Property is the difference in the value of the item you had before the loss to after the loss. In other words, say you got insurance on your boat and it was stolen one night and slammed in to a dock causing damage. Not only would you have a claim to fix the damage but you could also claim that the value of the boat was diminished by the fact that it was damaged. This is a loss of value that could impact you and is a financial consequence of the loss.

Increased expenses are other types of financial consequences of loss that are defined by you having to pay for something extra due to your loss. For example, say your vehicle drives just fine and then you are involved in an auto accident that renders your vehicle not drivable. You would have to rent a vehicle to drive and this is increased expenses that you would not have had to pay if you hadn't been involved in the loss.

The third type of financial consequence of loss is lost income and it applies to damage to your property that causes, you guessed it, a loss of income. For instance, you and your family own rental property in Oklahoma that you rent out to patrons. During tornado season the property is severely damaged and then is rendered unusable for renting purposes. You have lost income and that is of great financial consequence to you and your family.

Financial consequences of loss are categorized by insurance companies so that they can get a grip on the severity of your situation. The more you have lost the more they may have to pull out of reserves and prepare to get you back to where you were before the accident. This is the role of insurance companies in general and they can do a much better job of it when they can determine the financial consequences of your loss.