🏠 Module 3-The Complete Guide to Bus Inc

Question 1

BI

Answer 1

Business Income Coverage

Coverage that protects the existence of a business for post-loss recovery that includes:

• Net operating profit (or loss)
• Normal continuing operating expenses (including ordinary payroll)

Question 2

EE

Answer 2

Extra Expense Coverage

Additional expenses incurred to:

• Resume operations as quickly as possible
• Prevent further loss

Can be incurred either immediately after loss or during the restoration period

Question 3

DOL

Answer 3

Date of Loss

• Date when loss occurs and coverage starts

NOTE!
BEWARE of time period deductible (typically 24-72 hours)

Question 4

POR

Answer 4

Period of Restoration

Length of time to repair/restore the property

Question 5

NI

Answer 5

Net Income

Question 6

PML

Answer 6

Probable Maximum Loss

• “Worst-case scenario”
• Can be determined using a PML chart

Question 7

ALS

Answer 7

Actual Loss Sustained

Question 8

DOR

Answer 8

Date of Restoration

Actual date that repair/replacement is completed and payment ceases

Question 9

Three steps to develop proper BI coverage

Answer 9

• Establish annual BI/EE exposure
• Determine POR based on PML for all property (building, stock, machinery)
• Match limit and timeframe with best coverage form

Question 10

Seven Factors When Considering POR

Answer 10

• Length of time to rebuild
• Length of time to replenish stock
• Length of time to replace machinery
• Existence of peak seasons
• Delays due to severe weather
• Possibility of relocation
• Length of time to regain customer base

Question 11

Four Main Types of BI Coverage

Answer 11

• Actual Loss Sustained
• Coinsurance
• Maximum Period of Indemnity
• Monthly Limit of Indemnity

Question 12

Actual Loss Sustained

Answer 12

• No dollar limit
• Limited by time (typically 12 months)

Question 13

Coinsurance

Answer 13

• Based on BI worksheet
• Can go as low as 50% and as high as 125%
• Not limited by time
• Should always add “Agreed Value Endorsement” (which requires BI worksheet)

Question 14

Maximum Period of Indemnity

Answer 14

• Pays BI/EE loss for stated period of time (typically 30 days)
• Pays until business recovers or time limit expires, whichever comes first

Question 15

Monthly Limit of Indemnity

Answer 15

• Limited by time
• Period chosen at inception, typically 1/3, 1/4, 1/6
• Total limit divided by period and paid out over that number of months

Question 16

Nine Typical BI Coverage Gaps

Answer 16

• Ingress/egress
• Civil Authority
• Interruption of Computer Operations
• Contract Penalties
• Leasehold Interest
• Extended Period of Indemnity
• Blanket
• Utility Services Interruption
• Dependent Property

Question 17

Blanket Coverage

Answer 17

Protects against underinsurance and coinsurance

Question 18

Dependent Property Coverage

Answer 18

Covers loss as a result of loss of key suppliers, key customers or leader property

Question 19

Utility Services Coverage

Answer 19

• Covers loss as a result of utility service interruption

NOTE! Be sure that Overhead Transmission Lines coverage is included

Question 20

Civil Authority Coverage

Answer 20

Covers loss when access to property is prohibited by civil authority

Question 21

Ingress/egress Coverage

Answer 21

Covers loss when access to property is prohibited by unsafe conditions

Question 22

Extended Period of Indemnity

Answer 22

Provides additional time beyond typical 30-day period

Question 23

Interruption of Computer Operations Coverage

Answer 23

Covers loss resulting from the destruction and/or inaccessibility of computer data

Question 24

Contract Penalties Coverage

Answer 24

Covers loss from contracts that are cancelled due to insured’s inability to perform because of a loss

Question 25

Leasehold Interest Coverage

Answer 25

Covers loss due to difference in current rent versus prevailing rent when a lease is cancelled due to loss