If you’re a start-up in the construction or engineering industry, you may have come across an insurance product called delay insurance for startups – also known as DSU or Advanced Loss of Profits.
As the risk of delay in large-scale projects can be high and costly – highlighted during the disruption of the pandemic – delay insurance ensures start-ups are covered for lost income following a project set back.
In a nutshell, the protection can cover a loss of revenue and interest charges accumulated from the delayed work, as many companies will borrow capital to finance a project. It will cover the period between the date the project was meant to start until the date it eventually commences.
This insurance is not taken out on its own. It will usually be in conjunction with other insurance products such as construction all risks (CAR) insurance or erection all risks (EAR) insurance.
The insurance doesn’t encompass every scenario that leads to a delay, however. Instances which are covered by delay insurance include:
- What is called a ‘physical damage event’ – i.e. a fire or flood has occurred, damaging infrastructure and results in a delay
- A cut supply in public gas, water and electricity (as an add-on)
Instances which delay insurance would not cover include:
- Industrial action which results in a delayed project
- Poor project management
- Late arrival of equipment
- Insolvencies
For there to be a claim, the insurer needs to understand the reason for the delay and how much the damage event has cost a firm.
It is important to note that when claiming for DSU, you need to specifically state everything that resulted in the delay as contributing events leading up to a delayed project may involve covered and uninsured scenarios.
It is therefore important to talk to an insurer at the outset of a project to ensure risks specific to the project are considered and covered.
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