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BUSINESS INTERRUPTION INSURANCE/ BUSINESS INCOME INSURANCE (working of sum…
BUSINESS INTERRUPTION INSURANCE/ BUSINESS INCOME INSURANCE
Definition
: Types of insurance that covers the loss of income that a business suffers after a disaster.
The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.
Difference
Property policy (Fire)
Cover physical damage
eg: equipment, machinary
Direct loss
Business interruption (Fire consequential loss
Cover expenses cost
eg: Wages,revenue ,taxes
Indirect loss
Purpose:
-Protect the insured against loss of income
-Put insured in the same financial position as if no loss had occurred.
Scope of coverage
Prospective earnings of the insured business
Financial losses
Business interruption coverage
Relocation : Temporary location
Employee wages :Make payroll
Rent or lease payments: continue payment
Taxes :Required tax
Revenue : income earned during period
Business interruption insurance Can't cover
income that isn't documented-important o document
Losses from partial closures
Utilities
Losses from closures caused by non-covered damages
Indemnity
All insurance contracts of indemnity except life insurance, health insurance because life is not limit.
Two parties
Insured
insurer
Put insured as if no loss had occurred
Right of indemnity holder
All cost which he may be compelled to pay in defending
All sum which he may have paid upon compromise
All damages which he may be compelled to pay in any
Factor consider to calculate loss
Expected experience of business after the loss
Actual experience of the business after the loss mitigation
Actual experiences of business before the loss
Period of indemnity
Length of time for which benefits are payable under insurance policy
Depend on insured how long the request indemnity period
No period indemnity for other policy because paid intermendiately
The higher period,the higher premium
maximum period: 3 year
minimum period: 3 month
working of sum insured
working of claim amount
what is not cover
Type of policy and clause
rating factors
Underwriting consideration
Understand client's need and objective