| A close up view of: -Machinery loss of
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| | required.Indemnity PeriodIn contrast to a
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| profitDespite all the precautions taken by
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| | material loss, the loss of profits
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| managers, companies may suddenly find
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| | following a business interruption depends
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| itself in a situation that threaten its
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| | on the time factor involved. In other
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| survival, e.g. as a result of natural
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| | words, the longer the period for which
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| disasters, accidents, fire, industrial
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| | operation is interrupted or impaired, the
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| espionage, sabotage, damage to their
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| | greater the loss of profits. For this
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| reputation, or the failure of a supplier,
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| | reason it is essential to set a certain
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| the power supply or a telecommunications
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| | limit for the period during which the
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| network.It is well accepted fact that
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| | insurer is obliged to provide indemnity
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| risks can never be entirely eliminated.
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| | for an interruption loss. This is done by
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| However, while corporate managements
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| | the insured specifying an indemnity period
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| cannot guarantee that losses will be
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| | limit which represents the maximum time
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| precluded, they are at least expected to
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| | for which an insurer is liable for loss of
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| deal with loss events and the attendant
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| | profits. The period of indemnity begins on
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| aftermath in a satisfactory manner.In
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| | the date on which material damage could
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| addition to the traditional tasks of risk
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| | first be said to have occurred, as judged
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| management - identifying, analyzing,
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| | according to the recognized principles of
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| reducing and transferring risks companies
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| | engineering, at the latest, however, on
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| are thus increasingly being expected to
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| | the date when the loss of profits
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| prepare systematically to deal with loss
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| | commenced. Generally the indemnity period
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| events. A step for this purpose is
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| | limit is three, six, nine or twelve
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| machinery loss of profit.IntroductionUnder
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| | months. The basic rule is that the
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| both machinery and fire insurance,
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| | indemnity period limit should relate to
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| indemnity is provided, in respect of
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| | the amount of time required for removing
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| damaged or destroyed machinery, solely for
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| | the interruption loss, i.e. for repairing
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| the material loss sustained by the
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| | the machinery damaged or for the delivery
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| insured. These types of insurance do thus
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| | of new machinery in cases of a total loss,
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| not protect the insured against all the
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| | assembly and trial run. Higher premiums
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| losses which arise in connection with a
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| | are, of course, charged for long indemnity
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| fire or the breakdown of machinery, since
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| | period limits.In other words the indemnity
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| in most cases a material loss also causes
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| | period commences with the date of damage
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| an interruption or interference of the
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| | and lasts till such a time as the business
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| insured's business operations. The result
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| | is restored to its pre damaged level or
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| is a financial loss in the form of lost
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| | the period stipulated policy which ever
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| profit and unearned standing charges. In
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| | comes first. The policy insures earnings
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| many cases the loss sustained as a result
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| | of the business lost during the indemnity
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| of an interruption or interference of
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| | period. But in any case indemnity period
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| business operations by far exceeds the
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| | will not exceed 12 months.Graph showing
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| mere material loss.
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| | relation of indemnity period with
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| An awareness of the need for insurance
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| | damageSum InsuredSum insured is net profit
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| protection against the financial
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| | plus standing charges. For calculating
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| consequences of material damage arose at
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| | profit past years data are taken. It is
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| the beginning of this century, and the
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| | difficult to calculate gross profit for
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| result was the introduction of the two
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| | future so it is allowed to increase gross
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| variants, loss of profits following fire
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| | profit by 50%.Refund of premium is allowed
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| insurance and loss of profits following
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| | if estimated figure is more then the
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| machinery breakdown insurance - also
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| | actual figure but subject to that refund
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| called machinery loss of profits (MLOP)
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| | does not exceed 50% of premium
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| insurance. As the size of modern
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| | collected.PremiumPremium rates depend on
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| production facilities increases, MLOP
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| | the critical nature of the machinery
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| insurance is becoming more and more
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| | covered by the breakdown or explosion
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| important. The individual production
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| | policies; their relative importance and
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| stages in modern processes are often
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| | contribution to final output; the repairs,
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| accomplished by just one machine, the
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| | maintenance and stand by facilities
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| failure of which leads to substantial
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| | available and the indemnity period
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| interruption losses.Machinery loss of
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| | opted.Exclusions1. Loss or damage to
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| profit policy is just a replica of fire
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| | machinery or other items which are not
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| loss of profit policy. Like fire loss of
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| | listed in the list of machinery insured
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| profit is require standard fire policy
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| | even if the consequence of material damage
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| same with MLOP. It requires machinery
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| | to an item indicated in the list of
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| break down policy or boiler and pressure
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| | machinery insured is involved2. Any
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| plant policy or eclectic equipment policy.
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| | restriction on reconstruction or operation
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| In US it is known as Business
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| | imposed by any public
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| interruption insurance. Sometimes it is
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| | authority3. Shortage, destruction,
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| also called as business income coverage or
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| | deterioration and spoilage of or damage to
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| loss of profit insurance, is typically a
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| | raw materials, semi-finished or finished
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| rider or endorsement added to a business's
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| | products or catalyst or operating media
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| property/casualty policy. As such, what's
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| | even if the consequence of material damage
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| covered under the main property/casualty
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| | to an item indicated in the list of
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| policy will determine what is and is not
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| | machinery insured is
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| covered for business interruption. For
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| | involved4. Alterations improvements or
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| example, P/C policies typically cover
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| | overhauls being made while repairs or
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| fire, but not floods or earthquakes, so if
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| | replacements of damaged or destroyed
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| an earthquake damages the business, your
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| | property are being carried out5. Extension
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| business interruption coverage won't kick
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| | of repair period beyond 4 weeks on account
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| in unless insured have obtained additional
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| | ofa. Inability to carry or delays in
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| coverage for earthquakes.Need for
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| | carrying out repairsb. Prohibition to
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| MLOPBusiness expert Ms.Meenakshi Gupta
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| | operate the machinery due to import and/or
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| said this policy is must for every
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| | export customs & other restrictions or by
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| business organization as the market
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| | statutory regulationsc. Inability to
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| competitions is so tight that one minor
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| | secure or delays in securing replacement
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| loss can ruin the whole business.The
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| | parts, machines or technical
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| incident of machinery breaks down not only
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| | servicesd. Transport of parts to and from
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| cause loss of property to industry but
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| | the insured premises6. Willful acts or
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| result in stoppage of work, resulting in
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| | Gross Negligence on the part of Insured &
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| loss of production and loss of fixed
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| | or his employees7. War or warlike
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| charges which ultimately results in loss
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| | operations, Civil Commotion, Strike &
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| of profit. To cover loss of profit because
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| | Locked-out workers8. Nuclear reaction,
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| of machinery breaks down it requires a
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| | nuclear radiation or radioactive
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| specific policy given with machinery break
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| | contamination9. Loss or damage caused by
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| down policy or boiler and pressure plant
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| | any faults or defects existing at the time
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| policy or eclectic equipment policy.The
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| | of commencement of this insurance within
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| basic features of MLOP insurance will be
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| | the knowledge of the insured or his
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| dealt with.1 Subject matter insuredMLOP
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| | responsible representatives whether such
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| insurance provides cover for the actual
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| | faults or defects were known to Company or
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| loss of profits sustained as a result of a
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| | notTime exclusionExplosive factory,
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| business interruption caused by material
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| | petrochemical, power plant and fertilizers
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| damage indemnifiable under machinery
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| | 14 days exclusion where as in other
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| insurance. MLOP insurance provides
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| | industry it is 7 days.Underwriting
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| indemnity also in cases where the material
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| | consideration- Risk inspection
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| loss amount falls below the deductible to
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| | report.- Description of plant- Date of
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| be borne by the insured under the
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| | make- Work performed- Alternative means of
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| machinery cover. Basically speaking, a
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| | working- Repair time- Spare parts
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| loss due to an interruption or
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| | held- Unattended plant- Percentage of
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| interference of business operations is
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| | daily loss. Incase production is
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| made up of the following factors:1. The
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| | halted.- Any alternative means of working
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| reduction in operating profit, i.e. the
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| | available.- Stand by machine.- Breakdown
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| profit from selling the goods produced and
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| | experience.The possibilities of loss
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| traded by the insured and from rendering
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| | minimizationThe results of MLOP insurance
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| services.2. The standing charges, i.e.
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| | depend to a great extent on the loss
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| the costs incurred entirely or in part if
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| | minimization measures taken. It is
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| operations are interrupted or impaired.
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| | therefore quite obvious that this topic
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| These comprise wages and salaries,
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| | deserves special attention. Such measures
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| including social security contributions if
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| | for loss minimization are, for example,
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| they continue to become due during the
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| | the hiring of substitute motors,
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| interruption; interest, economic
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| | generators, transformers, boilers, small
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| depreciations, basic rates for third-party
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| | turbines, etc. or the speeding up of
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| energy, expenses for the current upkeep of
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| | repair work by carrying out complex
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| buildings and machines, rent, taxes and
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| | welding operations even on high-alloy
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| other non-specified working expenses,
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| | materials or using metalock and other
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| expenses for the preservation of vested
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| | special repair methods on the damaged
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| rights, insurance premiums and other
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| | components.Terms used in policy:The
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| business expenses, e.g. guaranteed
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| | following terms used in this policy will
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| commissions.3. Not included in standing
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| | be defined as follows:a. Gross Profit is
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| charges, however, are turnover taxes and
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| | defined as the sum produced by adding to
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| expenses for raw or auxiliary materials,
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| | the Net Profit the amount of all insured
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| fuels and goods purchased unless they
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| | fixed charges. If there is no Net Profit
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| serve to continue operations; excise
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| | the amount of all insured fixed charges
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| taxes, freight charges, specified license
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| | less that proportion of any loss from
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| and inventor's fees and similar expenses.
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| | business operations as the amount of the
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| Loss minimization costs are also covered
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| | insured fixed charges bears to all fixed
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| if they lower the insurer's obligation to
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| | charges.b. Net Profit is defined as the
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| indemnify. These include expenses that
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| | net operating profit exclusive of all:1)
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| avoid, minimize or terminate an
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| | Capital receipts and accruals; and2)
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| interruption loss soon after the
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| | Outlay properly chargeable to
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| occurrence of material damage.Loss
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| | capital;Resulting from the business of the
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| minimization is of great importance in
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| | Insured at the described location after
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| MLOP insurance. The following are
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| | due provision has been made for all fixed
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| examples.1. Purchase/sale of semi-finished
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| | charges and any other expenses, including
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| goods2. Provisional repairs3. Early
| |
| | depreciation, but before deduction of any
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| overhauls4. Purchase of non-identical (but
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| | taxes on Profits.c. Insured Fixed Charges
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| compatible) machinery5. Express,
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| | are defined as all fixed charges unless
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| airfreight6. Overtime work, additional
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| | specifically excluded in the
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| shifts, work on Sundays7. To accelerate
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| | declarations.d. Sales are defined as the
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| repairs on undamaged machines to reduce
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| | money paid or payable to the Insured
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| the interruption loss8. Rent of machinery
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| | for:1) Goods sold and delivered; and2)
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| (e.g. transformers, boilers,
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| | Services rendered;e. Rate of Gross Profit
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| compressors)9. Shifting of operations to
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| | is defined as the rate of Gross Profit
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| alternative plants10. Making up for the
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| | earned on the sales during the twelve (12)
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| production loss after
| |
| | full calendar months immediately before
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| reopeningCoverageMachinery loss of profit
| |
| | the date of physical loss or damage to the
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| policy gives cover against consequential
| |
| | insured property.f. Standard Sales are
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| losses following loss or damage to the
| |
| | defined as the sales during that period in
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| property insured under machinery breakdown
| |
| | the twelve (12) months immediately before
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| and/or boiler and pressure plant
| |
| | the date of the loss or damage to the
|
| insurance. This policy covers actual
| |
| | insured property which corresponds with
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| financial losses suffered by the insured
| |
| | the period of indemnity.Marketing aspect
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| due to business interruption arising
| |
| | for betterment of MLOP policy in
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| from:a) Reduction in turnover
| |
| | IndiaCapered to other products of
|
| andb) Increase in cost of workingThe
| |
| | engineering insurance, MLOP is very less
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| standard policy thus insures the loss of
| |
| | in number. This product requires proper
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| gross profits in the business because of
| |
| | advertisement and making the small
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| accident to the machinery, boiler and
| |
| | business owner aware of this policy. This
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| pressure plant, electric equipment covered
| |
| | policy is more suitable for small
|
| under respective policy.What Can Be
| |
| | industrial sector of India which facing
|
| Insured?Continuing Overhead Expenses: -
| |
| | many difficulties. Agents are required to
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| which have to be met out of reduced
| |
| | train about coverage and usages of policy,
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| earnings such as rent, taxes, interest on
| |
| | so that they will be in position to
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| debentures, mortgages and loans.
| |
| | explain other. Special advertisement
|
| Increase in Cost of Working: -
| |
| | campaign is required.Vishnu Ramdeo
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| necessarily incurred to overcome or to
| |
| | MBA (Insurance)
|
| minimize the effects of damage upon the
| |
| | National Law University
|
| business such as renting of temporary
| |
| | Jodhpur.
|
| premises, hiring of machinery or extra
| |
| | Indiamr.Vishnu Ramdeo has done his
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| labour costs.Loss of Profit: - which would
| |
| | garduation in honours in accounting and
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| be earned by industry if there was no
| |
| | finance. He has done his MBA in Insurance
|
| damage to machinery.Wages: - of employees
| |
| | from National Law University, Jodhpur
|
| not gainfully employed during the
| |
| | India. his intreset areas are insurance,
|
| interruption period and payments to
| |
| | taxation,investment,equity research and
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| employees whose services are no longer
| |
| | law.
|
