We have covered a lot of the basics on how to evaluate your business income and extra expense exposure.
The next question is what type of coverage do I choose. Some of the options are:
- Full year or partial year coverage
- How long do you anticipate being down in the worst case scenario?
- Maximum Period of Indemnity
- The coinsurance requirements are removed and replaced with coverage for the actual loss sustained during the first 120 days of loss, not to exceed the stated limit of liability.
- Monthly Limit of Insurance
- A limit of insurance is selected as well as the time-period. The most a carrier would pay is either 1/3rd, 1/4th or 1/6th of the limit selected in each month.
- Extra Expense
- What additional monies over and above your lost income would need to be spent to get you up and running faster?
Additional options that are above and beyond the basic limit:
- Extended Period of Indemnity – available with the full / partial year coverage.
- After your business re-opens, how long would it take to get back up to pre-loss sales? This is your extended period of indemnity. Insurance can cover you for your continued loss sales up to a period of time
- This coverage is stated is a period of time. IE-30 days, 60 days, 365 days or longer.
- The maximum payout would be the business income limit purchased.
- Agreed Amount
- The carrier agrees that values are accurate and will not apply a coinsurance penalty to the claim
- Blanket Coverage
- This is helpful when there are multiple locations and it's hard to determine the impact to all locations when a loss occurs at one location
- Ordinary Payroll Limitation or Exclusion
- Do you want to get paid if you have no income coming in?
- Do you have critical workers that you do not want to lose?
- If the answer is yes, then include this coverage and a payroll amount for a period of time
- Common deductions that can be taken are power, heat, refrigeration
- Selected if you are a high user of energy and the cost will not continue if you have a loss.
Items to consider when completing a business income worksheet include
Identify the longest possible interruption. “Worst Case”
Consider peak seasons.
Consider employment market conditions and training of new employees or loss of key employees.
Identify and analyze other situations that could affect repairs & the restoration of a business.
Finally, evaluate the Business Income from Dependent Properties.
What is a Dependent Property? This will be covered in the next post.
