Insurance WAEC

Business Interruption Insurance

Overzicht

When fire guts a factory, the burnt machines are only half the disaster. The other half is quieter and often larger: the months of lost sales while the roof is rebuilt, the salaries and rent that still fall due with no goods leaving the gate, and the customers who drift to a rival and never come back. A standard fire policy rebuilds the walls. It does nothing for the profit that stopped flowing. That gap is what business interruption insurance was invented to fill.

In this lesson you will learn what business interruption insurance really covers, how a consequential loss differs from the material damage that triggers it, why no claim is paid unless a physical-damage claim has first been admitted, and how the indemnity period and the rate of gross profit turn a ruined trading year into a figure the insurer can pay. You will work the gross profit calculation examiners set every year, and see exactly where candidates throw marks away.

Doelstellingen

  1. Define business interruption insurance and explain the loss it indemnifies
  2. Explain consequential loss and distinguish it from material damage
  3. Identify the causes of business interruption and the material damage proviso
  4. Explain how the indemnity period and the gross profit figure are determined

Mindmap

Dit onderwerp is in kaart gebracht zodat je ziet hoe de ideeen samenhangen.

Flashcards

Snelle geheugentraining op wat bij dit onderwerp getoetst wordt.

Lesnotitie

Emeka owns a plastics factory in Nnewi. He insures the building and the machines for their full value, so when a fire tears through the plant he is confident. The insurer rebuilds and re-equips exactly as promised. Yet eight months later Emeka is close to ruin. Why? Because throughout those eight months his machines produced nothing, his biggest customers moved their orders elsewhere, and the rent, the bank loan and the wages of his key staff went on falling due with no sales to meet them. The fire policy paid for the bricks and the steel. It paid nothing for the profit that stopped. Business interruption insurance is the cover Emeka needed and did not buy, and it is one of the most heavily tested products in the syllabus.

Lesevaluatie

Gefeliciteerd met het voltooien van de les op Business Interruption Insurance. Nu je de sleutelconcepten en ideeën, het is tijd om uw kennis op de proef te stellen. Deze sectie biedt een verscheidenheid aan oefeningen vragen die bedoeld zijn om uw begrip te vergroten en u te helpen uw begrip van de stof te peilen.

Je zult een mix van vraagtypen tegenkomen, waaronder meerkeuzevragen, korte antwoordvragen en essayvragen. Elke vraag is zorgvuldig samengesteld om verschillende aspecten van je kennis en kritisch denkvermogen te beoordelen.

Gebruik dit evaluatiegedeelte als een kans om je begrip van het onderwerp te versterken en om gebieden te identificeren waar je mogelijk extra studie nodig hebt. Laat je niet ontmoedigen door eventuele uitdagingen die je tegenkomt; beschouw ze in plaats daarvan als kansen voor groei en verbetering.

  1. Business interruption insurance indemnifies a business for: A. The cost of rebuilding its destroyed premises B. The loss of income and continuing fixed costs while operations are interrupted C. The market value of machinery destroyed by fire D. The wages of casual workers laid off after a fire Answer: B
  2. The material damage proviso requires that: A. The business has traded for at least three years B. A material-damage claim on the same property and peril has been admitted C. The indemnity period does not exceed twelve months D. The insured pays an excess before any claim is met Answer: B
  3. A firm's gross profit for insurance is 30,000,000 naira and its annual turnover is 150,000,000 naira. Its rate of gross profit is: A. 15% B. 20% C. 25% D. 45% Answer: B
  4. During the indemnity period a firm's turnover falls by 40,000,000 naira. Its rate of gross profit is 25%. Its loss of gross profit is: A. 8,000,000 naira B. 10,000,000 naira C. 16,000,000 naira D. 40,000,000 naira Answer: B
  5. For business interruption purposes, gross profit is best expressed as: A. Turnover minus cost of sales B. Net profit plus insured standing charges C. Turnover minus all expenses D. Net profit minus standing charges Answer: B

Aanbevolen Boeken

Principles of Risk Management and Insurance
Principles of Risk Management and Insurance
Ondertitel: Thirteenth edition
Uitgever: Pearson
Jaar: 2016
ISBN: 978-0-13-408257-8
Beschrijving: The standard introduction to risk and insurance, covering risk management, insurer operations and the main lines of life, health, property and liability cover.
Fundamentals of Risk and Insurance
Fundamentals of Risk and Insurance
Ondertitel: Tenth edition
Uitgever: Wiley
Jaar: 2008
ISBN: 978-0-470-08753-4
Beschrijving: A clear account of the nature of risk and the economics of insurance, written for beginning students across life, health, property and liability insurance.
Fundamentals of Insurance
Fundamentals of Insurance
Ondertitel: Second edition
Uitgever: Himalaya Publishing House
Jaar: 2017
ISBN: 978-93-5097-079-9
Beschrijving: An accessible treatment of insurance in four parts: the basics of risk, insurance management, life insurance and non-life insurance.

Herhalingsvragen

Benieuwd hoe eerdere vragen over dit onderwerp eruitzien? Hier zijn een aantal vragen over Business Interruption Insurance van voorgaande jaren.

WAEC SSCE - Insurance - 2015

Vraag 1 Verslag

(a)Define the term employer's liability in insurance.

(b)State three benefits that can be covered under employer's liability.

(c)State three causes of business interruption.

Antwoorddetails

(a) Employer's liability insurance

Employer's liability insurance is a class of insurance that covers an employer against legal liability to pay compensation for death, bodily injury, disease or ill-health suffered by his employees in the course of and arising out of their employment. It protects the employer from claims brought by workers who are injured or fall sick because of their work.

(b) Three benefits that can be covered under employer's liability

  1. Compensation for death or permanent disability of an employee arising from a work accident.
  2. Medical, hospital and treatment expenses incurred by the injured employee.
  3. Loss of earnings or wages during the period the employee is unable to work, and legal costs of defending claims.

(c) Three causes of business interruption

  1. Fire or explosion that destroys premises, plant or stock, forcing operations to stop.
  2. Breakdown of essential machinery or equipment.
  3. Natural perils such as flood, storm or earthquake damaging the business premises.
  4. Loss of power supply or of key raw materials halting production.
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