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72-hour clause in construction all risk policies

                                

The recent floods in Tamil Nadu and neighboring states have caused massive destruction which includes lives, property, vehicles and other consequential losses. Standard policies in fire, marine cover the floods under the STFI peril or what is called the AOG perils.

For Act of God(AOG) perils the 72-hour clause is applied by the insurance companies in construction all risk insurance policies. 

The clause states that any loss of or damage to the insured property arising from a single fire peril (which includes all fire perils) during the period of 72 consecutive hours shall be deemed as a single event and therefore subject to one deductible and one claim limit.

Standard policies usually cover loss of or damage to the property and or interests of the insured directly caused by the perils mentioned below:

  •     Earthquake 

  •    Volcanic eruption

  •    Storm tempest flood inundation

For AOG perils, policy wordings, if read in detail, elaborate the claim time period i.e.  72 hours clause and consequences thereof. This 72-hour clause is applicable to all AOG perils and all insured and losses which occur during 72 consecutive hours shall be deemed as single loss occurrence. However, if such an event is to continue for a period exceeding 72 consecutive hours, then it shall be deemed as two or more separate events and another deductible may be applied accordingly.

Generally 72 hour clause follows the AOG perils in all policies and claims reported until the peril ceases operation are covered. It means loss that occurs on operation of the peril from inception and which continues up to 72 hours from inception will be treated as a single claim. 

For instance a portion of the building under construction was damaged due to heavy floods in the area. The insured claimed the loss amount under construction all risks policy. Another claim was reported under the same policy, for the machinery that was damaged due to the floods and since the claim was reported within the 72 hours both the claims were clubbed as a single claim and paid.

Later a third claim was reported for the same peril under the same policy with similar damages but after the 72-hour time period had lapsed. This claim was paid as a separate claim.

The difference to the insured is that the deductible is applied  twice. All claims reported within the 72 hours are treated as a single claim and one deductible is applied, also the sum insured is accounted as single claim. Any single claim reported after the 72 hour period is a separate claim and will attract the deductible separately and sum insured needs to be reinstated.

The deductibles are high in these policies with AOG perils and it makes a huge financial difference more so in the face of a loss.

It is recommended to examine the cover, details, conditions etc. before purchasing the policy.

We at Zen insurance assist in choosing the right Insurance cover to suit your needs. Please contact us for  assistance.

  Disclaimer:   

Zen Insurance Brokers is an IRDAI registered broker which facilitates quick & accurate insurance broking services. We deal with only regulator approved products of insurers. We do not underwrite the products.

 

 

 

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