By Joey Romeo
Industrial Coverage
Business Interruption insurance may provide coverage for
financial losses arising from an inability to conduct business, as well as the
extra expenses occurred in dealing with the business interruption. In the event of a loss, this insurance can
make the difference between a business recovering from a loss, or from being
unable to continue operations and going out of business.
One crucial consideration is that this coverage is generally
an optional coverage, which must be purchased separately and added to a
business’ basic property policy.
Policyholders must provide written notice of the claim as
soon as possible and be prepared to fully document their loss with records such
as sales receipts, financial statements and tax returns.
Business interruption losses are measured on a net basis
which would be the gross earnings less the normal expenses incurred, plus any
additional expenses which are solely attributable to the loss.
Normally, business interruption insurance only applies when
there is direct physical damage from a covered cause of loss to the insured’s
property which causes the business interruption. For example, a fire burns down the insured’s
location.
In addition to the basic business interruption insurance,
there are also several additional coverages that should be considered and added
to the business interruption insurance.
However, these coverages need to be reviewed thoroughly, as they may
contain further restrictions and limitations on coverage, such as a “waiting
period” (the power must be out for at least 24, 48, 72, 96 hours, etc.), or a
sublimit such as $25,000 in coverage.
Utility Interruption
coverage applies when a business loses income solely due to a power loss to their location. There are two
types of utility interruption coverage- “on premises”, where the business
suffers physical damage to utility equipment on their premises, such as an
electrical box, a transformer, or wires.
“Off premises” utility interruption coverage is where the business will
receive coverage even if the utility interruption is due to events away from
the insured’s premises, such as a widespread power outage.
Civil Authority
coverage provides coverage when a governmental authority issues an
order preventing the insured from accessing its premises to conduct
business. For example, if there is a
mandatory evacuation order.
Ingress/Egress
coverage also provides coverage
when an insured is prevented from accessing their location to conduct business,
but need not arise from a governmental order.
For example, where there are numerous large trees down from the wind
that blocks the only road into and out of the insured’s location.
Contingent
Business Income coverage provides coverage where the insured location
is not affected physically, but the insured’s supplier has suffered physical
damage that prevents it from fufliling its obligations to the insured to
provide material, supplies, etc.
Dependent
Properties coverage provides
coverage where the insured location is not affected physically, but the
insured’s customer has suffered physical damage that prevents it from accepting
the insured’s products and services as it normally would (for example,a routine
monthly delivery is not able to be completed, and the insured loses that sale).
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