Construction Insurance: Delay in Start Up Insurance

Delays in construction/erection projects can impact the start-up time of a project and subsequently the profit that the business was supposed to make. Delay in start-up (DSU) insurance (also known as advance business interruption or advance loss of profits) insures you for the financial consequences of a delay in project completion resulting from insured physical damage.

A DSU policy is designed to restore the insured to the financial position they would have enjoyed if the loss had not occurred. So for example if a fire occurs during a factory building project which delays its completion and subsequently the profits that were supposed to be made in the period from the anticipated start date, DSU will provide cover for such a loss.

The interest insured under a DSU policy may be within the following categories:

• Gross profit (equivalent to loss of anticipated revenue, comprising debt service costs, fixed operating costs and anticipated net profit less variable costs (e.g. fuel, labour, and consumables).
• Debt service.
• Fixed costs. Additional costs are also insured to the extent that they reduce the amount of insured loss (increased cost of working).

The policy usually has an indemnity period. This is the period, beginning from the anticipated date of commercial operations (or “trigger date”), for which the revenue to be generated by the business is insured.

Cover Extensions may include insured delay arising from:

• Damage to insured property at named/unnamed supplier’s premises.
• Denial of access to/egress from the site.
• Damage to utility suppliers (e.g. electricity,  water).
• Damage to key items of a contractor’s plant and equipment.

Waiting Period or Time Excess:

This is the first part of loss for which your insurer will not pay. By default it is part of the indemnity period (although by special arrangement the indemnity period may apply in excess of the waiting period). It generally applies in the aggregate for all indemnifiable claims during the initial policy period.

As Firstlink we help clients structure cost-effective Construction/Erection Insurance solutions. Talk with our team today about your project on (0242)744048/79, 0782146301, 0779203074 or 0772434103 or email info@riskmanagers.co.zw