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Business Interuption, Causes of BI - Coggle Diagram

- - - - Businesses exist to generate income and to make profits. They may be one or a combination of the following:
      - Producers or manufacturers of a product
      - Retailers selling products
      - Service providers.
      - If a business suffers a serious fire,
        ideally the firm’s insurers would reinstate the damaged property immediately,
        and the insured would be able to carry on their business without affecting their income and profits.
- - - - possible to purchase engineering business interruption policies, which can protect against interruptions caused by the mechanical or electrical breakdown of machines.
      - sold to Small - medium enterprises (SME's) by insurers directly
        
        The insured estimates the gross profit or the revenue/fees/income as appropriate for the financial year most nearly concurrent with the period of insurance. If the maximum indemnity period is 12 months, then that estimate is increased by 33% to arrive at the limit of indemnity. EXAMPLE 12 months estimate 100,000 24 months max indemnity means x2 so 200,000 limit of indemnity = 200,000 + 33% = £266,667.
        
        loss of gross profit policies & loss of fees/income/revenue policies include cover for increased costs of working
        Cover is restricted to ‘the additional expenditure necessarily & reasonably incurred for the sole purpose of avoiding or diminishing the reduction in turnover’.
        
        must calculate correct gross profit or fees/revenue/income figure and the importance of requesting a suitable maximum indemnity period.
- - - - Variable costs will not be incurred - therefore exclude variable expenses by deducting from turnover as part of the calculation to arrive at the gross profit sum insured
      - Turnover + closing stock/work in progress - the uninsured working expenses + opening stock/work in progress