Advanced Loss of Profit / Delay in Startup Policy
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.
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. But what about the financial loss suffered due to delay in commissioning the project ? More so, when your repayment schedule, on loans taken, are linked to the income earned after the scheduled commissioning?
This policy offers a solution by insuring the loss of anticipated gross profit due to delay in commissioning of the project, directly and solely resulting from a physical loss or damage to property insured and payable under a marine -cum- erection policy, storage-cum -erection policy or contractor’s all risk policy.
The policy can be taken only in conjunction with one of these policies.
The Advance Loss of Profit is designed to cover:
v Fixed Operation & Management Costs
a) Debt Service Charges
b) Increased Cost of Working
c) 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:
a) Inventory losses
b) Delay in shipment of supplies
c) Normal project schedule slippages
d) Non -availability of funds for repairs/replacement to damaged items
e) 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, 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.
How to claim
In the event of any occurrence which might cause a delay and give rise to a claim under this policy, the following steps should be taken:
a. immediately notify the insurance company by phone/fax and in writing within 48 hrs. of the occurrence.
b. take necessary steps to minimise delay
c. extend full cooperation to the insurers and surveyors deputed by them. Surveyor should be permitted to visit the site where loss has taken place and negotiate directly with the responsible contractor to identify the cause and extent of damage, examine possibilities of minimising delay and make reasonable suggestions to avoid or reduce such delay. The condition shall be evidence of the leave and license of the insurers to do so. If the insured or anyone acting on his behalf hinders or obstructs the insurers from doing the above or does not comply with the recommendations of the insurers, all benefits under this policy shall be forfeited.
d. submit details of the claim along with necessary documents like books of accounts, invoices, balance sheets etc. to substantiate the loss.
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