Details - EQ Insurance

Can I buy a Consequential Loss Policy if I do not have a Fire Insurance Policy?

No, you cannot as a Consequential Loss Policy contains a Material Damage Proviso which states that a claim must be admitted in the Fire Policy before the loss in the Consequential Loss Policy is payable.

Is it therefore necessary that the cover in the Consequential Loss Policy must be the same as that in the Fire Insurance Policy?

Yes, the perils insured under the Consequential Loss Policy should be the same as those in the Fire Insurance Policy.

In arriving at the Gross Profit to be insured, what are Uninsured Working Expenses and why must I deduct such expenses from the Gross Profit?

Uninsured Working Expenses are specified working expenses which are variable, i.e. they increase or decrease correspondingly with increase or decrease in turnover. Examples are packing materials, freight, carriage charges and marine insurance. You must deduct such charges from the Gross Profit because they will not be incurred during the period of interruption to your business.

If I am starting a new company how do I insure the Gross Profit if I do not know what that the amount is?

You can either make a projection of the Gross Profit or alternatively you can insure the standing charges plus the estimated net profit.

What are standing charges?

Standing charges are fixed expenses which you will have to incur regardless of your turnover and which you must continue to incur even after a loss/damage. Examples of standing charges are rent, property tax, telephone bills, property and vehicle insurance, interest and directors’ fees.

How can I insure wages?

Normally following a fire, you may not need to retain all the workers, e.g. daily rated employees who can be laid off. However, you may also wish to retain those monthly paid employees or those employees who are critical to your operations. You can include the wages of these workers in the Gross Profit (i.e. you do not list them as Uninsured Working Expenses). Alternatively, you can insure Wages/Payroll separately from Gross Profit.

Must the indemnity period necessarily be 12 months?

No, it can be more or less than 12 months, depending on the nature of the business and how quickly the business can revert to normal in the event of the business being totally destroyed. Hence you can insure for as short as 3 months to as long as 36 months.

If the indemnity is shorter or longer than 12 months, what will be the sum insured for Gross Profit?

For periods less than 12 months, the sum insured will be the 12 months Gross Profit. However, for periods longer than 12 months, the sum insured will have to be increased proportionately.

My business could be adversely affected because of a loss occurring at my neighbour’s, supplier’s or customer’s premises. How do I protect my gross profit against such events happening?

The policy can be extended to include such events as well as other events on the payment of additional premium. The common extensions are: o Specified Suppliers’ Premises o Unspecified Suppliers’ Premises o Specified Customers’ Premises o Denial of Access o Public Utilities o Infectious or Contagious Diseases, Murder, Suicide, Pest, Food or Drink Poisoning, or Defective Sanitary Arrangements

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