Fire Loss of Profit Policy for Windmills: Coverage and Indemnity Guidelines
Fire loss of profit policy for windmills
Material Damage Cover:
Normal Fire policy covers the property against physical damage due to Fire and allied perils. This policy pays for material damage only. It does not pay for loss of production arising out of an accident at the location insured in the policy. Thus indemnity for material damage does not provide complete protection to the insured who will also suffer production losses due to total or partial stoppage of the windmills
Loss of profit policy:
Fire loss of profit policy is available to cover loss of gross profit arising out of an accident due to perils insured under Standard Fire policy. This policy will cover Gross Profit which shall be the Energy Income for windmills.
The computation of the same can be done as under:
|
A |
No. of units generated during the year by wind mills insured |
|
B |
Less: wheeling charges |
|
C (A-B) |
No. of units for which credit is given by Electricity company |
|
D |
Unit Rate at which billing is done by Electricity Company |
|
E(c*D) |
Total Energy Income |
|
Gross profit= E |
Unit rate in month previous to the date of loss at which credit is considered by Electricity Company will be taken into account for computation of claim. Same principal will apply to determine adequacy of Sum Insured.
It will be advisable to declare GP on higher side in order to avoid under insurance. There is a provision for refund up to 50% in the policy. You will declare actual GP for the financial year on expiry of the policy & will be eligible for refund on difference of GP insured in the policy & actual GP limited maximum up to 50%.
Distinction between Fire and Loss of Profit policy:
Whereas the subject matter of fire insurance is the property, the subject matter of profit policy is the business of the insured that is the earning capacity.
Indemnity period:
Indemnity period is the maximum period for which insurers are liable to compensate for loss of profit. This period has to be selected by the insured and it may vary from 3 months to three years. The choice of indemnity period would be mainly influenced by the time that would be taken for reinstatement of the windmills.
It is in the interest of the insured to select an indemnity period which is of such duration that it will represent the longest period during which his business could be affected following a serious
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