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Advance Loss of Profit

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This insurance is commonly referred to as ALOP (Advance Loss of Profits) and is designed to protect the interests of the Principal. Other terms often seen are "Loss of Profits following Delay in Completion" or "Advance Rentals" or "Delay in Start Up". The policy offers cover against loss of anticipated earnings/profits due to the delay in commissioning of the project following a loss covered under the project insurance policies. It is normally written in conjunction with CAR/EAR Insurance. The cover is designed to protect the Gross Profit or Gross Revenue that the Principal anticipates earning following the completion of the Contract. If there is a delay in the completion of the contract, for example as a result of a major fire, the anticipated income will not be available to meet the expenses which have been, and are still being incurred, and the expected net profit will be delayed.

Large and complex installations where the investments are high are adversely affected if the projects are delayed beyond the scheduled completion date. The project continues to incur the burden of interest on term loan, interest on debentures, wages and salaries, other miscellaneous administrative standing charges and interest on outstanding working capital, in addition to the loss of expected net profit which insured business could have earned had it commenced on the scheduled date.

The essential difference between a loss assessment under advance loss of profits cover and a loss assessment under business interruption cover is that there are no previous trading results with which to make comparison.

What is covered?

  • Loss of gross profits - based on anticipated sales, cost and prices.
  • Loss of gross earnings- sales value of production less consumed stocks, supplies and services purchased.
  • Increased cost of working - costs involved in minimizing the effects of the delay.
  • Principal and interests - lending institutions’ interest in the portion of gross profit.
  • Loss of rent - as a result of premises not being ready to earn rent.
  • Special expenses - costs involved because of delay such as advertisement campaign etc.

 

For Further Information Contact:

Anil Varma

Director & President

Telephone

+91-22-6655 8858

Email

anil.varma@howdenindia.com