Project Insurance
Advance Loss of Profit (ALOP) Insurance/Delayed Start-Up
Advance Loss of Profit (ALOP) Insurance, also known as Delay in Start-Up (DSU) Insurance, is designed to protect businesses from financial losses due to project delays caused by insured risks.
If a construction or infrastructure project is delayed due to an unforeseen event, such as fire, natural disasters, or equipment breakdown, the policy compensates for the resulting loss of anticipated income, fixed expenses, and debt repayments.
It is typically taken alongside a Contractors’ All Risk (CAR) or Erection All Risk (EAR) Insurance policy to provide complete risk coverage.
Why is Advance Loss of Profit (ALOP) Insurance Essential?
- Protects Against Revenue Loss
- Covers Fixed Costs & Overheads
- Safeguards Debt Repayments
- Ensures Business Continuity
- Builds Investor Confidence
Important Things You Should Note
- Must Be Linked to a CAR/EAR Policy – ALOP is not a standalone policy; it works in conjunction with Contractors’ All Risk (CAR) or Erection All Risk (EAR) insurance.
- Only Covers Insured Perils – The delay must be caused by a covered event under the main policy (e.g., fire, flood, earthquake).
- Excludes Contractor’s Negligence – If the delay is due to poor planning, mismanagement, or contractor inefficiency, the policy does not pay.
- Waiting Period Applies – There is a deductible period (waiting period) before the coverage kicks in.
- Compensation is Based on Financial Records – Payouts depend on audited financial data, revenue projections, and loss assessment.
What is Covered & What is Not Covered?
Covered
- Loss of Expected Gross Profit – Covers the anticipated profit that would have been earned.
- Fixed Costs & Overheads – Includes rent, salaries, and operational expenses.
- Debt Repayments & Financial Charges – Covers interest on loans and financial obligations.
- Extra Expenses for Mitigation – Costs incurred to reduce delays and speed up project completion.
- Supplier Delays (if Insured Peril Applies) – Covers delays due to insured events affecting suppliers or contractors.
Not Covered
- Delays Due to Poor Project Management – Excludes mismanagement, labor strikes, or insufficient manpower.
- Regulatory or Legal Delays – If a project is delayed due to permits, government policies, or regulatory issues, it is not covered.
- Market Conditions & Economic Factors – Any loss due to inflation, demand fluctuations, or financial downturns is excluded.
- Defective Design & Material Failure – Excludes delays caused by faulty designs, material defects, or poor workmanship.
- War, Cyber Attacks, & Pandemics – Excludes losses due to political instability, cyber incidents, and global pandemics unless specifically covered.
Frequently Asked Questions (FAQs)
Who should buy ALOP Insurance?
Construction companies, project developers, infrastructure firms, and manufacturers involved in large-scale projects that are time-sensitive.
How is the coverage amount determined?
The sum insured is based on expected revenue, fixed costs, and financial commitments projected from the project’s completion date.
How long is the waiting period before the claim is paid?
The deductible period (waiting period) is typically 30 to 90 days, depending on the policy.
Does ALOP Insurance cover subcontractor delays?
Only if the delay is caused by an insured peril, such as fire, flood, or machinery breakdown, affecting the subcontractor.
Can ALOP be customized based on project needs?
Yes, policies can be customized with extensions for supplier failure, key personnel loss, or project acceleration costs.
