Business Interruption Insurance (Machinery Breakdown Loss of Profit Insurance i.e. MLOP Insurance)

Loss of gross profit, increased cost of working, and additional expenses.

Typically, natural disasters are covered if included in the policy.

Wear and tear, willful negligence, pre-existing faults, and damage from war or terrorism.

The period during which the insurer covers the loss of profit and additional expenses, starting from the date of machinery breakdown.

Yes, policies can be tailored to specific industry needs.

Financial records, incident reports, and supporting documents for the claim.

It is used to calculate the financial impact of the business interruption.

Yes, if included in the policy.

Typically excluded unless specifically included in the policy.

Yes, if spoilage risk endorsement is included.

The sum insured will be reduced by the amount of the loss.

Covers income loss due to damage at suppliers’ or customers’ premises.

Typically excluded unless caused by a covered peril.

Allows ‘Output’ to be substituted for ‘Turnover’ in loss calculations.

Yes, if included in the coverage.

Typically excluded unless specifically covered.

Usually excluded.

Helps determine the sum insured and basis for calculating losses.

Yes, with appropriate endorsement.

Based on gross fees earned during the indemnity period.

Yes, it covers increased costs to avoid or reduce losses.

Insured Standing Charges are the fixed costs that continue to be incurred during the indemnity period even when business operations are interrupted.

Annual Output refers to the total output produced during the 12 months immediately before the date of damage.

The Indemnity Period is the duration during which the insurer covers the loss of profit and additional expenses starting from the date of the machinery breakdown.

Standard Output is the output during the 12 months immediately before the date of damage, which corresponds to the indemnity period.

Memo 1 states that if goods are sold or services rendered elsewhere during the indemnity period, the revenue from these sales or services will be accounted for in the turnover.

Memo 2 refers to the relative importance of each machine in terms of its impact on total gross profit, disregarding loss minimization measures.

Memo 3 provides for a return of premium if the actual gross profit earned is less than the sum insured, subject to conditions.

Memo 4 allows for time spent on overhauls, inspections, or modifications during the period of interruption to be considered in loss calculations.

The Rate of Gross Profit is the rate earned on the output during the financial year immediately before the date of damage, adjusted for business trends and circumstances.

The alternative basis clause allows ‘Output’ to be substituted for ‘Turnover’ in calculating losses.

This cover extends to loss of profits due to spoilage resulting from interruption of business caused by damage to stock-in-process, machinery, containers, and equipment.

Exclusions include any restrictions on reconstruction or operation imposed by public authorities.

The policy excludes extensions of the normal repair period due to delays in securing replacement parts, machines, or technical services.

Alterations, improvements, or overhauls made during repairs are excluded from coverage.

This coverage protects against income loss due to damage at suppliers’ or customers’ premises.

The policy excludes losses resulting from willful act, willful neglect, or gross negligence by the insured or their representatives.

The deductible is the amount of loss the insured must bear before the insurer covers any remaining loss, calculated based on the standard turnover and rate of gross profit.

Typically, losses due to deliberate erasure, loss, distortion, or corruption of information on computer systems are excluded.

It covers the additional expenditure necessarily incurred to avoid or reduce the reduction in turnover during the indemnity period.

The Provisions Clause includes details such as benefits from other premises and relative importance of machinery.

Delays in transportation of parts to and from the insured’s premises are excluded from coverage.

Spoilage risks may be included as an additional item through an extension of the policy.

The rate of gross output is calculated by applying the rate of gross profit to the output during the indemnity period.

The accumulated stocks clause provides for an equitable allowance if turnover loss is postponed by using accumulated stock.

The sum insured can be reinstated by paying an additional premium calculated on a pro-rata basis for the remaining period of insurance.

Standing charges are fixed costs that continue during the indemnity period and are considered in calculating the gross profit.

Non-compliance with policy conditions can lead to the insurer denying liability for any claim.

The indemnity period limit is the maximum duration for which the insurer will cover the loss of profit and additional expenses.

The policy may cover professional fees for restoring business records if included in the coverage.

Typically, losses due to vandalism or civil commotion are excluded unless specifically covered in the policy.