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BUSINESS INTERRUPTION INSURANCE (CAN'T COVER (Utilities-Typically…
BUSINESS INTERRUPTION INSURANCE
DEFINITION
Also known as business income insurance
A type 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/due to the rebuilding process after a disaster.
DIFFERENCE BETWEEN PROPERTY POLICY & BUSINESS INTERRUPTION INSURANCE
PROPERTY POLICY (FIRE)
Cover physical damage
Direct Loss
BUSINESS INTERRUPTION INSURANCE
Cover expenses cost
Indirect Loss
PURPOSE
Protect the insured against loss of income
Put the insured in the same financial position as if no loss had occured
SCOPE OF COVERAGE
To protect the prospective earnings of the insured business
Provides cover for the financial losses due to an interruption to a business caused by damage to property
COVERAGE
Revenue-Income earned during period
Rent/lease payments-Continue Payment
Relocation-Temporary Location
Employee Wages-Make payroll
Taxes-Required Tax
CAN'T COVER
Utilities-Typically stopped
Income that isn't documented-Important to document
Losses from partial closures
Losses from closures by non-covered damages
INDEMNITY
"A contract by which party promises to save the other from loss caused to him by the conduct of the promisor himself/ by the conduct of any other person, is called as Contract of Indemnity
MAXIMUM INDEMNITY PERIODS
Minimum: 3 Month, Maximum: 3 Years
ASCERTAINMENT OF LIABILITY
A liability is said to be ascertained liability if it is determined/fixed/imposed under some contract, law/other such act
UNASCERTAINMENT OF LIABILITY
Liability which is not determined/fixed and a provision is created for such anticipated liability then it is to be added to net profit