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CHAPTER 3 : BUSINESS INTERUPPTION POLICY (WHAT? (PURPOSE (protect the…
CHAPTER 3 :
BUSINESS INTERUPPTION POLICY
WHAT?
DEFINITION
covers the loss income that a business suffers after a disaster. the income loss covered may be due to the disaster-related closing of the business facility or due to the rebuilding process after the disaster.
PURPOSE
protect the insured against loss of income. pay for specific continuing expenses that are covered under the policy, which could include payroll and taxes.
put the insured in the same financial position as no loss occurred
DIFFERENCE
property policy (fire)
cover physical damage
direct loss
business interupption policy (fire consequential loss)
cover expenses cost
indirect loss
SUBJECT MATTER
any type of business
LIABILITY
unascertained liability
not determined / fixed and a provision is created for such anticipated liability then it is to be added to net profit
ascertainment liability
if it is determined or fixed or imposed under some contract, law or other such act
WHICH?
SCOPE OF COVER
provides cover for the financial losses due to an interruption to a business caused by damage to property.
revenue - income earned during period
to protect the perspective earnings of the insured business
rent lease payment - continue payment
employee wages - make payroll
relocation - temporary location
taxes - required taxes
UNINSURED PERIL
income that isn't documented - important to document
losses from partial closures
utilities - typically stopped
losses from closures caused by non-covered damages
HOW?
INDEMNITY
right of the insured
all damages which insured may be compelled to pay in any sued in respect of any matter to which the promise to indemnify applies
all cost which insured may be compelled to pay in defending such sued provided insured acted prudently or with the authority of the insurer
all sum which insured may have paid upon compromises of such sued provided the compromise was not contrary to the order of the insurer and was prudent or was authorized by the insurer
CALCULATE THE LOSS
consideration shall be given to the experience of the business before the probable experience hereafter
factors to consider
expected experience of the business after loss
actual experience of the business after the loss - mitigation
actual experience of the business before the loss
reasonableness of repair period - due diligence and dispatch
SUM INSURED
working of claim amount
type of policies and clauses
underwriting considerations
what is not covered
rating factors
understand client's needs and objectives
WHO?
INSURED
enterpreneur
WHEN?
INDEMNITY PERIOD
12 months-36 months