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Principal’s advance loss of profits

Principal’s advance loss of profits Insurance (ALOP)

Principal’s advance loss of profits insurance, also known as advance loss of profits (ALOP) or delay in start-up insurance, indemnifies the actual loss of gross profit sustained as a result of delayed commencement of business operation caused by an accident covered under the contractors’ all risks policy or the erection all risks policy.

ALOP insurance compensates for:

  • standing charges (continuing business expenses) including the salaries and wages paid to employees and the net profit, the increase in cost of working, i.e. the additional expenditure necessarily and reasonably incurred for avoiding or diminishing a reduction in turnover, revenue or rentals.

The sum insured is for all normal cases the gross profit obtained from the turnover of goods produced or handled, services rendered or revenue or rentals achieved in the course of the insured’s business for a period of 12 months (i.e. normally for the business year). The period during which the insurance will make good losses is defined as the indemnity period, which is determined by the insured depending upon the replacement period for the building or plant insured.