Section 3 Flashcards
What is the purpose and need of business income coverage?
Provide funds to replace the business’s lost net income and pay the expenses of the business that continue for the time it should take the business to be restored to operations
Why is business income coverage not widely sold
Hard to visualize the financial impact
Difficult to understand
Not required by lending institutions
Difficult to gather financial information
Perceived lack of benefit compared to cost
What does Business Income mean?
Net income (profit or loss) that would have been earned/incurred, and continuing normal operating expenses incurred including payroll.
When does the period of restoration begin and end?
Business Income: Starts 72 hours after the physical loss, ends when the business should be repaired using reasonable speed
Continued Expenses: Starts as soon as the physical loss occurs, ends same time.
What does the Ordinance and Law endorsement do for business income?
Extends the period of restoration
What are the 6 requirements needed to trigger Business Income Coverages?
Actual loss of business sustained
Loss is due to necessary suspension of operations
Loss sustained is during the period of restoration
Must be caused by a physical loss
Must be at the described premises
Must be from a covered cause of loss
What are the four types of dependent properties for business income?
Contributing locations
Recipient locations
Manufacturing locations
Leader locations
What are the four additional coverages for business income?
Civil Authority
Alterations and new buildings
Extended business income
Interruption of computer operations
What is the civil authority coverage in respects to business income?
Pays for the loss of BI sustained caused by actions of the government that prohibit access to the describes premises within one mile of the damaged property. Must be due to direct physical loss to another property not covered, and must be from a covered cause of loss. Coverage is for 4 continuous weeks.
What is extended business income?
This provides an extra 60 days to get back up and running once the repairs have been made
What are the four loss conditions for business income?
Appraisal
Duties in the event of a loss
Loss determination
Loss payment
What is the minimum coinsurance required for business income?
50%
How is coinsurance calculated in business income?
The amount required if the net income plus all operating expenses, time the coinsurance percentage
What factors should be used to determine the appropriate limit of insurance on business income?
Expected period of restoration
Business income loss during period of restoration
Period of time needed to restore operations to the level of income that would have existed had no loss occurred
Normal continuing operating expenses that would be incurred, including payroll
Estimated amount for extra expenses if they were to occur
What are the four optional coverages for business income?
Maximum period of indemnity
Monthly limit of indemnity
Business income agreed value
Extended period of indemnity
