Loss of Profits is a reduction in the insured's net profit or profit margin, whether or not it is covered under a policy. Insurance policies may provide coverage for loss of profits arising from specified insured events such as property damage, supply chain disruptions, or operational interruptions, typically within business interruption or contingent business interruption coverage. Unlike loss of income (which addresses gross earnings), loss of profits focuses on net profitability after deducting specified working expenses and costs. When covered, indemnity is calculated using agreed accounting formulas defined in the policy, based on historical financial performance and subject to the indemnity period and policy conditions.
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