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Frequently Asked Questions

Additional Increased Cost of Working

Is Additional Cost of Working endorsement something you must elect to insure or is it an automatic cover?

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Many Policy Wordings allow for a specific amount of cover automatically for AICW. For others an AICW sub limit needs to be declared.

Is it possible to take Additional Increased Cost of Working (AICW) cover in place of Insurable Gross Profit and in what scenarios would this be appropriate?

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Yes, it is possible however in general it is not advisable to have AICW only in place for majority of businesses. AICW does not cover the loss of Insurable Gross Profit and payroll. In the event of a partial or total loss, the majority of businesses will not be able to resume operations by simply relocating their office or changing their address and telephone numbers, etc.

If clients won’t take Gross Profit cover, AICW provides some protection but in our view rarely enough.

Service based businesses such as accounting firms, management consultancy organisations, lawyers, etc. may not need to cover their gross profit, as they are able to relocate their offices and resume operations with a minimum disruption to their clients. To recommend this approach to your client, you need to be very confident that you understand their business model and that the client understands the potential exposures which may eventuate from this approach.

Is there a rule of thumb of what the Sum Insured for Additional Increased Costs of Working (AICW) should be for a client?

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For an appropriate AICW amount, MSM recommend start with 5-10% of the Insured Gross Profit amount as a rough guide and then amend for client specific factors.

Where does “rent of alternative premises” become an AICW and not ICW?

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Any increased cost should be claimed under ICW but it must pass the sole purpose test or economic limit test. If not then part or all goes to AICW.

With a standard SME client what do you think is a reasonable amount to insure for AICW?

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On a business pack start with $250,000 and work up for size and complexity.

With a lot of office type risks trading online more these days, we have a lot of client’s that would put up resistance to Loss of Trading Profit cover. We recommend high limits for AICW cover in these circumstances but is it enough for businesses trading at say more than $20,000,000 of revenue? The client is convinced they can set up elsewhere and continue to trade without loss of trading profit.

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This is obviously a client specific determination and all the facts and circumstances would need to be considered.

Any premises dependent business can suffer a loss of gross profit and it is not advisable to offer AICW only for any online retail business with one major warehouse. However, if the business has multiple warehouses in different locations, an AICW cover only might be adequate.


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