If you are a start-up in the construction or engineering sector, you may have come across an insurance product called delay insurance for start-ups – also known as DSU or Advanced Loss of Profits.
Because the risk of delays on large-scale projects can be high and costly – highlighted during the disruption of the pandemic – delay insurance ensures that startups are covered for lost revenue due to a project setback.
In a nutshell, the protection can cover the loss of revenue and interest costs due to the delayed work, as many companies will borrow capital to finance a project. It covers the period between the date the project is supposed to start and the date it finally starts.
This insurance is not taken out separately. This is usually done in combination with other insurance products, such as Construction All Risks (CAR) insurance or Erection All Risks insurance (EAR).
However, insurance does not cover every scenario that leads to delays. Cases covered by delay insurance include:
- This is a so-called ‘physical damage event’: a fire or flood has occurred, damaging the infrastructure and causing delays
- A reduction in the supply of public gas, water and electricity (as an additional payment)
Cases where delays are not covered by insurance include:
- Work strike resulting in a delayed project
- Poor project management
- Late arrival of equipment
- Insolvencies
In order to make a claim, the insurer must understand the reason for the delay and how much the damage event has cost a business.
It is important to note that when claiming DSU, you must specifically state everything that led to the delay, as contributing events that led to a delayed project can include covered and uninsured scenarios.
It is therefore important to speak to an insurer at the start of a project to ensure that risks specific to the project are considered and covered.
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