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BUSINESS INTERRUPTION
/ FIRE LOP
SFSP Policy indemnifies only physical loss or
material damage to buildings, machinery,
fixtures, stocks etc. by fire and / or other
insured perils
However indemnity for material damage
does not provide protection to the insured for
trading losses due to total or partial stoppage
of his business following fire loss
The trading losses which result are :
Net profit
Standing charges
Increased cost of working
Basis of FLOP
The subject matter of fire insurance is material property
The subject matter of FLOP / Consequential Loss / Business
Interruption Policy is the business of the insured that is earning
capacity of the property
Key terms to understand the basis of profit insurance
Turnover is defined in the profits policy as the money paid or
payable to the insured for goods sold and delivered and for
services rendered in the course of the business at the premises
i.e. Sales
Variable charges
Standing charges
Net profit
Position After Fire Loss And
Claim Under FLOP
BEFORE FIRE RS. AFTER FIRE RS.
Standing Charges
Net Profit
GROSS PROFIT
Net profit + Insureds standing charges
If there be no profit the amount of the Insured Standing
Charges less such a proportion of the net trading loss as the
amount of the Insured Standing Charges bears to all the
Standing Charges of the business
TURNOVER
The money paid or payable to the insured for goods sold and delivered
and for services rendered in course of the business at the premises. In
other words, it is the Insureds income from trading including services
rendered
ANNUAL TURNOVER
The turnover during the twelve months immediately before the date of
the damage
STANDARD TURNOVER
The Turnover during that period in the twelve months immediately before
the date of the damage which corresponds with the Indemnity Period
Concept of Gross Profit When There
Is A Net Trading Loss
Particulars Rs.
Turnover 20,00,000
Production Cost 12,00,000
Standing Charges 10,00,000
Net Trading Loss 2,00,000
Insured Standing Charges 8,00,000
Standing Charges Not Insured 2,00,000
Total Standing Charges 10,00,000
IP
STO
1.4.15 ATO
31.12.15
1.1.15
LOSS
31.3.14
1.4.13 PP
TO
RATING FACTORS
Premium Rating Depends On :
On Output Basis
Revenue Basis
BASIS OF INSURANCE
Turnover Basis:
Revenue Basis For Clubs, Hotels, Private Schools, Private Hospitals And
Nursing Homes; Gross Fees Basis For Professionals Like Solicitors,
Chartered Accountants.
Net Claims Payable = Rs. 8 lacs / Rs. 12.5 lacs x 1.76 lacs
=
Rs. 1,12,640
THANK YOU