Business Interruption Insurance

Akopọ

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.

Awọn Afojusun

  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

Akọ̀wé Ẹ̀kọ́

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.

Ìdánwò Ẹ̀kọ́

Oriire fun ipari ẹkọ lori Business Interruption Insurance. Ni bayi ti o ti ṣawari naa awọn imọran bọtini ati awọn imọran, o to akoko lati fi imọ rẹ si idanwo. Ẹka yii nfunni ni ọpọlọpọ awọn adaṣe awọn ibeere ti a ṣe lati fun oye rẹ lokun ati ṣe iranlọwọ fun ọ lati ṣe iwọn oye ohun elo naa.

Iwọ yoo pade adalu awọn iru ibeere, pẹlu awọn ibeere olumulo pupọ, awọn ibeere idahun kukuru, ati awọn ibeere iwe kikọ. Gbogbo ibeere kọọkan ni a ṣe pẹlu iṣaro lati ṣe ayẹwo awọn ẹya oriṣiriṣi ti imọ rẹ ati awọn ogbon ironu pataki.

Lo ise abala yii gege bi anfaani lati mu oye re lori koko-ọrọ naa lagbara ati lati ṣe idanimọ eyikeyi agbegbe ti o le nilo afikun ikẹkọ. Maṣe jẹ ki awọn italaya eyikeyi ti o ba pade da ọ lójú; dipo, wo wọn gẹgẹ bi awọn anfaani fun idagbasoke ati ilọsiwaju.

  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

Awọn Iwe Itọsọna Ti a Gba Nimọran

Principles of Risk Management and Insurance
Principles of Risk Management and Insurance
Atunkọ: Thirteenth edition
Olùtẹ̀jáde: Pearson
Odún: 2016
ISBN: 978-0-13-408257-8
Apejuwe: 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
Atunkọ: Tenth edition
Olùtẹ̀jáde: Wiley
Odún: 2008
ISBN: 978-0-470-08753-4
Apejuwe: 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
Atunkọ: Second edition
Olùtẹ̀jáde: Himalaya Publishing House
Odún: 2017
ISBN: 978-93-5097-079-9
Apejuwe: An accessible treatment of insurance in four parts: the basics of risk, insurance management, life insurance and non-life insurance.

Àwọn Ìbéèrè Tó Ti Kọjá

Ṣe o n ronu ohun ti awọn ibeere atijọ fun koko-ọrọ yii dabi? Eyi ni nọmba awọn ibeere nipa Business Interruption Insurance lati awọn ọdun ti o kọja.

WAEC SSCE - Insurance - 2015

Ibeere 1 Ìròyìn

(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.

Wo Idahun