Basis of Sum Insured / Indemnity
In considering the adequacy of sum insured on Gross Profit & Wages, it should be borne in mind that Consequential Loss insurance is subject to the same Conditions of Average applicable to Material Damage insurance. In the event of loss, under-insurance becomes immediately apparent with the comparison of the sums insured & the actual Gross Profit & Wages earned in the 12 months period immediately before the damage, suitably adjusted for any trend in the business.
Allowing for a loss occurring at or near the end of the period of insurance and affecting the business in the ensuing Indemnity Period, the sums insured should represent the annual Gross Profit & Wages anticipated during the current year of insurance duly adjusted for anticipated trends in the business and wages structure during the ensuing period of interruption.
Premium Rating (Average Base Rate)
The rate shall not be less than the basic fire and/or perils/clauses rates (including the additional rates for clauses such as Electrical Installation Clause (B) etc for the fire (material damage) insurance for the same perils/clauses on the property concerned.
It is the period beginning with the occurrence of the damage and ending no later than the maximum indemnity period thereafter during which the results of the business shall be affected in consequence of the damage. The length of the indemnity period depends on the nature of the business, the ability to obtain other premises and facilities with which the existing premises or contents can be replaced or repaired. The period chosen should be sufficiently long enough to enable the business to recover.