Advance Loss of Profit (ALOP) Insurance
Protect Revenue When Your Project Start Slips
A fire or flood during construction does more than damage the works. It pushes back the date your plant, hotel or building starts earning, while interest on project loans keeps running. Advance Loss of Profit (ALOP) insurance, also called Delay in Start-Up (DSU), pays for the income lost and fixed costs incurred because an insured physical loss delayed commercial operation. MILES helps project owners and lenders define the numbers so the cover responds when it matters.
What ALOP Insurance Covers
Lost Gross Profit
The profit the project would have earned during the delay period, measured against projected revenue and running costs.
Debt Service
Interest and loan repayments falling due during the delay, which is why lenders often insist on this cover.
Standing Charges
Fixed costs such as salaries, rent and insurance that continue even though the project has not started earning.
Chosen Indemnity Period
Cover lasts for an agreed maximum delay period, set by how long it would realistically take to rebuild and restart.
Increased Cost of Working
Reasonable extra costs spent to cut the delay, such as air-freighting parts or paying overtime to recover the schedule.
Linked to CAR or EAR
Works in tandem with your project material damage policy, so the physical loss and the resulting delay are both insured.
What is Advance Loss of Profit (ALOP) insurance?
Advance Loss of Profit insurance covers the loss of anticipated gross profit, or debt service costs, when a project's commercial start is delayed by physical damage insured under the construction or erection policy. It is also known internationally as Delay in Start-Up (DSU) insurance.
ALOP is not a standalone cover. It is attached to a material damage policy, usually Contractors' All Risk or Erection All Risk. If the physical damage is not covered by that policy, the resulting delay is not covered either. It is one of the specialist covers in our construction insurance range.
What ALOP insurance covers
- Loss of gross profit for the period the start of operations is delayed, compared with the scheduled date.
- Debt service, meaning interest and principal repayments on project loans that fall due during the delay, where the policy is written on that basis.
- Fixed or standing charges that continue to be incurred, such as salaries of staff already hired, rent and insurance.
- Increased cost of working, meaning reasonable extra spending to shorten the delay, up to the amount of loss it saves.
What is not covered
- Delays that are not caused by insured physical damage, such as approvals, labour shortages, funding gaps or design changes.
- The first days of delay within the time deductible, often expressed as a number of days.
- Delays made worse by the insured's lack of funds to repair or replace promptly.
- Penalties and liquidated damages payable to others under contracts.
- Delays arising from damage to items excluded under the material damage policy.
Who needs ALOP insurance
Project owners whose revenue depends on a fixed start date. Examples include power and renewable energy plants, manufacturing units, hotels, hospitals, warehouses and commercial buildings pre-let to tenants. It is especially relevant where the project is funded through term loans, because lenders often require ALOP to protect debt servicing during construction. Contractors do not usually buy ALOP; it protects the owner's income, not the contractor's.
How the sum insured and premium are decided
Sum insured
The sum insured is normally the projected annual gross profit, or the annual debt service, for the first period after commercial operation. It is built from the project's financial model. If the indemnity period is longer than 12 months, the sum insured should be scaled to match.
Indemnity period
This is the maximum length of delay the policy will pay for. It should reflect how long it would take to rebuild the most critical item, including ordering long-lead equipment such as transformers or turbines. Too short an indemnity period is a common gap.
Premium
Premium depends on the project type, the critical path of construction, the availability of spares, the time deductible chosen and the terms of the underlying CAR or EAR policy.
How MILES helps
- We work through the project's financial model with your finance team to define gross profit or debt service correctly.
- We map critical, long-lead items to set a realistic indemnity period.
- We align the ALOP wording with the CAR or EAR policy so both respond to the same loss.
- We compare terms and time deductibles across insurers and reflect lender requirements.
- We have handled construction placements for 24 of 30 major project launches by leading Gurugram developers over two years, and we bring that project experience to ALOP structuring.
Once the project is running, the income risk passes to Fire Loss of Profit and, for plant, machinery loss of profit covers.
How a claim works
- An insured physical loss occurs and is notified under the CAR or EAR policy.
- You notify the ALOP insurer and MILES at the same time, as the delay element needs early assessment.
- A surveyor and often a forensic accountant review the revised project schedule and the original financial model.
- The actual delay beyond the time deductible is measured against the scheduled commercial operation date.
- The insurer pays the lost gross profit or debt service for that delay, within the indemnity period. Our claims team supports you through each step.
Cover, exclusions and premiums depend on the insurer’s policy wording and underwriting. MILES Insurance Brokers Pvt. Ltd. is an IRDAI-licensed direct broker (Life & General, Reg. No. 954); the insurance is issued by the insurer. Insurance is the subject matter of solicitation.