The terms “additional increased cost of working cover” and “increased cost of working cover” are related to insurance policies that provide coverage for financial losses incurred by a business due to a disruption in their operations. While they are similar in nature, there are slight differences between the two.
- Increased Cost of Working Cover:
Increased Cost of Working (ICOW) cover, also known as Consequential Loss cover, is designed to protect a business against the increased expenses it may face while trying to maintain its operations after a loss or damage covered by the primary insurance policy. It covers the additional costs necessary to minimize the interruption and keep the business running.
Example: Let’s say a manufacturing company experiences a fire in its facility, leading to a temporary shutdown. During the closure, the company may need to rent an alternative workspace, pay higher wages for temporary employees, and expedite the delivery of raw materials to meet customer demands. The increased cost of working cover would help reimburse the company for these additional expenses incurred during the shutdown period.
- Additional Increased Cost of Working Cover:
Additional Increased Cost of Working (AICOW) cover extends the protection provided by ICOW cover. It provides coverage for additional expenses incurred by the insured business to speed up the recovery process and reduce the overall downtime, beyond the expenses covered by the ICOW policy.
Example: Following the previous example, suppose the manufacturing company wants to expedite the repair and restoration process after the fire. They may choose to hire specialized contractors or purchase new equipment to expedite the recovery. The additional increased cost of working cover would reimburse the company for these extra expenses incurred to minimize the downtime and accelerate the business’s return to normal operations.
In summary, while both ICOW and AICOW covers provide financial protection for increased costs incurred by a business during a disruption, AICOW offers broader coverage for additional expenses beyond what is covered by the ICOW policy.
Can additional increased cost of working be procured without BI cover?
Typically, the Additional Increased Cost of Working (AICOW) cover is not available as a standalone policy and is usually purchased as an extension or endorsement to a Business Interruption (BI) insurance policy.
Business Interruption insurance is designed to cover the financial losses incurred by a business when its operations are interrupted or suspended due to a covered event, such as fire, natural disasters, or other perils specified in the policy. It provides compensation for lost profits, fixed expenses, and other financial obligations during the interruption period.
The AICOW cover, as an extension to the BI policy, provides additional coverage for the extra expenses incurred to expedite the recovery and minimize the downtime beyond what is covered by the base BI policy. It is intended to help businesses recover and resume operations as quickly as possible.
Therefore, while it’s technically possible for an insurer to offer an AICOW cover without requiring a BI policy, it is not commonly available in the insurance market. The two coverages are closely intertwined, and AICOW is typically offered as an add-on to a BI policy to provide comprehensive protection against the financial impacts of business interruption and the associated increased costs of working.
What is the difference between AICOW and additional expenditure extension clause?
The Additional Increased Cost of Working (AICOW) cover and the Additional Expenditure Extension Clause are both insurance provisions that provide coverage for additional expenses incurred by a business during a disruption or loss. However, there are some differences between the two:
- Coverage Scope:
AICOW Cover: AICOW cover is typically an extension or endorsement to a Business Interruption (BI) insurance policy. It covers additional expenses incurred by the insured business to expedite the recovery process and reduce downtime beyond what is covered by the base BI policy.
Additional Expenditure Extension Clause: The Additional Expenditure Extension Clause is a provision that can be added to various types of insurance policies, such as property insurance or business interruption insurance. It covers additional expenses incurred by the insured business to minimize the loss or damage caused by an insured event.
- Purpose:
AICOW Cover: AICOW cover is specifically designed to address the increased costs and expenses associated with resuming business operations as quickly as possible after a loss or disruption. It aims to help the insured business recover and mitigate the financial impact of the interruption.
Additional Expenditure Extension Clause: The Additional Expenditure Extension Clause serves a broader purpose. It covers additional expenses incurred by the insured business to prevent or mitigate the loss or damage caused by an insured event. It can include expenses related to protection, preservation, and reinstatement of the insured property.
- Policy Application:
AICOW Cover: AICOW cover is typically applied in the context of a business interruption insurance policy, where the primary focus is on covering the financial losses resulting from the interruption of business operations.
Additional Expenditure Extension Clause: The Additional Expenditure Extension Clause can be applied to various types of insurance policies, including property insurance or business interruption insurance, depending on the specific terms and conditions of the policy.
In summary, while both AICOW cover and the Additional Expenditure Extension Clause provide coverage for additional expenses incurred by a business, AICOW cover is typically an extension to a business interruption policy and focuses on the increased costs associated with resuming operations. The Additional Expenditure Extension Clause, on the other hand, is a broader provision that can be added to different types of insurance policies and covers additional expenses related to preventing or mitigating the loss or damage caused by an insured event.
