🏠 Module 3-The Complete Guide to Bus Inc Flashcards

The Complete Guide to Business Income

1
Q

BI

A

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)
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2
Q

EE

A

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

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3
Q

DOL

A

Date of Loss

  • Date when loss occurs and coverage starts

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

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4
Q

POR

A

Period of Restoration

Length of time to repair/restore the property

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5
Q

NI

A

Net Income

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6
Q

PML

A

Probable Maximum Loss

  • “Worst-case scenario”
  • Can be determined using a PML chart
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7
Q

ALS

A

Actual Loss Sustained

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8
Q

DOR

A

Date of Restoration

Actual date that repair/replacement is completed and payment ceases

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9
Q

Three steps to develop proper BI coverage

A
  • Establish annual BI/EE exposure
  • Determine POR based on PML for all property (building, stock, machinery)
  • Match limit and timeframe with best coverage form
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10
Q

Seven Factors When Considering POR

A
  • 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
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11
Q

Four Main Types of BI Coverage

A
  • Actual Loss Sustained
  • Coinsurance
  • Maximum Period of Indemnity
  • Monthly Limit of Indemnity
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12
Q

Actual Loss Sustained

A
  • No dollar limit
  • Limited by time (typically 12 months)
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13
Q

Coinsurance

A
  • 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)
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14
Q

Maximum Period of Indemnity

A
  • Pays BI/EE loss for stated period of time (typically 30 days)
  • Pays until business recovers or time limit expires, whichever comes first
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15
Q

Monthly Limit of Indemnity

A
  • 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
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16
Q

Nine Typical BI Coverage Gaps

A
  • Ingress/egress
  • Civil Authority
  • Interruption of Computer Operations
  • Contract Penalties
  • Leasehold Interest
  • Extended Period of Indemnity
  • Blanket
  • Utility Services Interruption
  • Dependent Property
17
Q

Blanket Coverage

A

Protects against underinsurance and coinsurance

18
Q

Dependent Property Coverage

A

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

19
Q

Utility Services Coverage

A
  • Covers loss as a result of utility service interruption

NOTE! Be sure that Overhead Transmission Lines coverage is included

20
Q

Civil Authority Coverage

A

Covers loss when access to property is prohibited by civil authority

21
Q

Ingress/egress Coverage

A

Covers loss when access to property is prohibited by unsafe conditions

22
Q

Extended Period of Indemnity

A

Provides additional time beyond typical 30-day period

23
Q

Interruption of Computer Operations Coverage

A

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

24
Q

Contract Penalties Coverage

A

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

25
Q

Leasehold Interest Coverage

A

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