Advance Loss Of Profit Insurance
A Loss of Profit Policy for Projects
A Marine-cum-Erection or Contractor's All Risk policy covers only physical damage to
property which, at best, covers the expenses incurred for repairing or replacing the
damaged property.
Scope
The Advance Loss of Profit is designed to cover:
- Loss of Gross Profit = Net Profit+ Standing Charges
OR
- Loss of Gross Earnings = Turnover-Specified Working Expenses
OR
- Fixed Operation & Management Costs
- Debt Service Charges
- Increased Cost of Working
-
Special Expenses e.g. penalties
The policy pays for the actual loss of gross profit incurred during the period of delay, commencing
from the scheduled date of commencement of commercial operation upto the actual date of commencement
of commercial operation subject to a time excess and indemnity period selected. The delay, however
should have occurred due to a claim payable under marine -cum- erection policy, storage-cum
-erection policy or contractor's all risk policy.
The policy does not cover delay due to:
-
Inventory losses
- Delay in shipment of supplies
- Normal project schedule slippages
- Non -availability of funds for repairs/replacement to damaged items
- Cancellation of licence or Govt. restrictions etc
Who can take the policy?
The policy is taken by the Principal as he stands to lose in case of any delay in the commissioning
of the project.
How to select the sum insured?
The sum insured should represent the Anticipated Gross Profit (i.e.Net Profit + Standing Charges)
for the Indemnity Period selected.Net Profit means Business profit before taxation.
Standing Charges means fixed charges incurred even in the absence of business activity e.g. interest
charges, salary & wages, Director's fees, O&M costs, activity e.g. interest charges, salary & wages,
Director's fees, O&M costs, liquidated damages.
Indemnity Period should be selected keeping in mind the maximum period required for re-importing,
re-erecting and/or re-testing any part of the project.
