CLICK HERE TO LEAVE US A REVIEW & CHANCE to WIN FREE HOME INSURANCE FOR A YEAR!
Have Questions?
1 (877) 488-7225
Our business interruption options are a great supplemental insurance to protect your business in case of an interruption. Coverages are normally provided by way of endorsement to the property policy.
The Fundamental aim of all business interruption insurance policies is to insure what the business the loss of income that resulted from a reduction in business operations that is a consequence of physical damage loss by an insured peril.
All businesses, both large and small require business interruption insurance. For example:
There are two policy forms generally used to insure loss of income to a business. Each represents a different approach to achieve the same result in the insuring of business interruption losses. There is the Gross Earnings Form and the Profits Form. This portion will focus on the Gross Earnings Form.
The Profits Form provides indemnity from the date of loss until the level of sales reaches the level that the business would have attained had the loss not occurred, subject to the policy limit and the period of indemnity. Due diligence and dispatch to repair, replace or rebuild damaged property is imposed only upon the insured. It requires the insured to do and permit to be done all reasonable things which minimize the loss.
Gross Profit = Net Profit Before Tax + Insured Standing Charges
The Profits form requires that the insured carry insurance to 100% of the possible loss of gross profits. There are no alternatives. Insureds are not required to insure all of the business operating expenses (standing charges) but select only those which they wish to include in the coverage. Standing coverages that are excluded by the policy are:
The Profits wording specifically states that the indemnity period will not exceed 12 months from the date of loss. Coverage will apply only for the time during those 12 months in which the results of the business are actually affected as a consequence of the destruction or damage caused by an insured peril. This can be extended to 18, 24, 30 or 36 months. It is important when extending the period of indemnity to ensure that the sum insured is adequate for this time period.
There are two policy forms generally used to insure loss of income to a business. Each represents a different approach to achieve the same result in the insuring of business interruption losses. There is the Gross Earnings Form and the Profits Form. This portion will focus on the Gross Earnings Form.
Gross Earnings = Total net Sales – Variable Expenses
In this approach, the Indemnity Period commences at the time of the loss and ceases immediately upon the reinstatement of the lost or damaged property. By ceasing payment at this time, the Gross Earnings Form assumes that the insureds are returned to the competitive position they enjoyed immediately prior to the loss.
There are a variety of Gross Earnings forms used to insure Business Interruption losses, all of which adhere to this approach. The basic form does not include an indemnity period. However, if a Premium Adjustment Clause is added or included, the period of indemnity will be 12 months but this period can be extended for an additional premium (i.e. 18 months, 24 months and etc.).
Gross Earnings Forms are suitable for businesses that are able to immediately start generating a comparable sales level to that which was achieved before the loss occurred. Once the doors are open for business, the insured is considered to be indemnified for their loss under this form. Thus, businesses that are unique and offer a specialty product or service with little competition will benefit from this type of insurance. When they open their doors they will have most of their customers back because they offer a product or service that cannot be offered by a competitor down the street.
I am always greeted by name, and asked questions that would only be known by someone who has been paying attention and has taken the time and effort to know ‘me’. I have so appreciated this!
