LOSS OF PROFITS FOLLOWING MACHINERY BREAKDOWN
The Machinery Breakdown Insurance does not protect the insured against all losses which arise in connectiion with the breakdown of the machinery. In most cases, a material loss also causes interruption or interference in the insured's business operations. The result of this interruption is a finacial loss in the form of LOST PROFITS and standing charges. For us to accept a MLOP, there must be a Machinery Breakdown Policy for the subject matter (machinery) that when damaged, would cause an interruption to the business resulting in loss of profits.
What makes up the Sum Insured?
The Sum Insured is made up of Operating Profits and Standing Charges in the course of 12 successive calender months (Business Year)
WHAT IS COVERED?
The MLOP Policy provides cover for actual loss of profits sustained as a result of a business interruption caused by a material damage indemnifiable under the Machinery Breakdown Insurance. The MLOP also provides indemnity in cases where the material loss amount falls below the deductible to be borne by the insured under the Machinery Breakdown Insurance
Loss minimization charges are also covered if they lower our obligation to the indemnity. These include:-
Expenses that avoid, minimise, terminate an interruption loss soon after the occurrence of the material damage. These include:-
Sale of semi finished goods
Purchase of non - identical but comparative machinery
Overtime work, Additional shifts, work on Sundays, etc
Renting of machinery
Shifting of operations to alternative plants
Making up for the production loss after re-opening
What makes up the loss due to an interruption of the business operation?
The reduction in operating profits (profits from selling the goods produced and sold by the insured). In other words, (Reduction in Turnover)
Standing Charges (the costs incurred entirely or in part if the operations are interrupted or impaired)
What are Profits?
Every objective a business is to produce revenue (income) greater than the costs incurred to run and maintain the business. The difference is known as Profits
What is Turnover?
This is the total income of the business resulting from Sales completed and services rendered
What is an Indemnity period?
This is the maximum time for which an Insurer is liable for loss of profits. The period begins on the date on which the material damage is said to have occurred. This limit is chosen by the Insured at the time of taking the MLOP. The basic rule in choosing the indemnity period is that it should relate to the amount of time required to repair the damaged machines/or delivery of new machines. The Insurers allow a period between 3 month to 12 Months. A period beyond 12 months can also be negotiated with the insurer. In this case a higher premium would be charged considering the longer the indemnity period, the higher the loss of profits.
What to consider when selecting an Indemnity Period
The nature of business
The ability to obtain alternative machines
Availability of spare parts
Speed within which the machines can be repaired and brought to normal operations
This is set to exclude/or discourage minor losses or short periods of interruption to the business being brought to the Insurer. The time excess can be between 7 days to 30 days. Where a longer time excess is accepted by an Insured, the premium rating may be reduced considerably.
A duly completed proposal form
Insured's ID/Registration and PIN
Report incidence/claim as soon as the happening
Document the claim by providing the necessary documents i.e; Claim form duly completed, police abstract form, Records of works, etc
FURTHER DETAILS ON LOSS OF PROFIT FOLLOWING A MACHINERY BREAKDOWN
Please refer to our Policy Wording