CATASTROPHE POLICIES
The principle of a Catastrophe Policy is slightly different from the Whole Turnover policy in so much as the premium is usually fixed for the year and has a more limited bearing on turnover than is the case for a Whole Turnover policy.
The basic principle is that for most companies a certain amount of bad debt in each year is a consequence of normal trading and is probably inevitable. There does however become a point where bad debts above a certain figure will either wipe out the years profits or indeed lead to the insolvency of the company. We can therefore structure a policy that will start paying claims once an agreed level of losses have been incurred. The insured percentage is usually 100%, which allows a company to more accurately budget and forecast their required bad debt reserve. There is also a level of non-qualifying loss that will exclude smaller losses from ever forming part of the policy, an example of a typical policy structure is listed below: -
Maximum annual liability for claims - £250,000
The premium rates for this type of policy tend to be cheaper than a Whole Turnover policy. This policy is suitable for any company that is prepared to accept a certain amount of bad debt before claims become payable.
Other than the difference in structure the administrative procedures and additional features and benefits tend to be very similar to Whole Turnover policies.
Website by CVW Web Design