Declared Value on Gross Profit

Business Interruption Insurance covers the Loss of Future Profits. As a result, the amount declared on Gross Profit at the commencement of the renewal period must reflect the insurable Gross Profit expected to be obtained, in the future, over the maximum possible indemnity period.

Depending on the indemnity period selected the declared value will need to be based on the potential annual Gross Profit in the year following the renewal period and beyond.

Declared values are often reviewed annually. But what if, in the midst of the renewal period: -

• A new business is acquired.
• A new and substantial customer is obtained.
• A significant new contract is won.
• An improved production facility is commissioned.
• A major competitor exits the market.

All these factors may substantially and unexpectedly increase sales mid term, before the annual review of the declared value.

If a claim arises an underinsurance penalty may apply.

The declared value on Gross Profit should be constantly reviewed and increased mid-term if necessary.

Lets avoid underinsurance!

Also See: -

Worksheet For Declared Value On Gross Profit - ISR Policy
Underinsurance - Business Interruption & Property
Underinsurance Clause - Business Interruption & Property
Underinsurance on Business Interruption & How To Avoid It

Author

Published with permission of Claim Solutions Pty Ltd.

Insurance Policy

Country: - Australia.

Policy Description: - Mark IV Industrial Special Risks (ISR) policy and many Composite and Businesspack policies.

Insurer: - Various.

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