Gross profit sum insured – Ashleigh Mackay and Associates
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Omitting wage roll from gross profit sum insured
October 12, 2016
News

Employee wages represent a significant expense for most businesses, and can become a major cause of underinsurance in the event of a loss. When calculating gross profit sum insured, businesses need to decide whether or not to subtract employee wages – and if so, to what extent. Getting it wrong could have a substantial bearing on the adequacy of that business’s gross profit sum insured. Tackling wage roll misunderstandings When calculating gross profit, accountants will usually subtract employee wages to arrive at a final figure. However, for insurance purposes, the significance of wage roll needs to be determined before deciding whether or not to subtract it. This difference in approach is a regular source of underinsurance. Where does wage roll fit in? Depending on the nature of your customer’s business, a proportion of their wage roll might constitute an uninsured working expense (UWE). By declaring a UWE, you are stating that those wages will not continue following a loss, and…

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