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Advance loss of profits
This cover will only be considered as an adjunct to a Contractors all risks or Erection all risks policy.
Advance loss of profits cover provides indemnity to the insured in respect of lost profits due to the contract works being delayed as a result of a loss insured under the terms of the works section of a (Contractors all risks or Erection all risks) policy.
The following basic considerations must always be kept in mind when considering an Advance loss of profits risk:
- Generally, it is only the principal and financiers who can be insured.
- The ALOP sum insured must be in reasonable proportion to the sum insured under the CAR or EAR section.
- The entrepreneur's risk as well as contractual penalties cannot be insured under an Advance loss of profits policy.
- As the period of indemnity starts with the provisional hand over date at the end of the erection/construction period (date of practical completion) and not the date of any loss under the material damage policy, it is important that the erection/construction programme be available for assessment.
- Extra caution is necessary with experimental type projects and uncertain market conditions.
- Considerable technical and accounting know-how must be locally available for loss minimisation.
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