What does the Selling Price Clause compensate for?

The Selling Price Clause is designed to compensate for potential loss of profit on finished stock. In the context of insurance, this clause acknowledges that when inventory is lost or damaged, there is not only a loss of the physical items but also a significant impact on the revenue that could have been generated from selling those items.

When a business holds finished goods, they are expecting to sell them at a certain price that includes a profit margin. If those goods are damaged or lost, the business does not just lose the cost of the goods themselves; it also loses the future profit that would have been earned from their sale. Thus, the Selling Price Clause provides coverage that is reflective of this broader financial impact, ensuring that businesses can recover the expected profits on their inventory that is no longer available for sale.

Understanding this clause is crucial for businesses to ensure that they have adequate coverage that aligns with their financial interests, especially in maintaining cash flow and operational stability following loss events.