Understanding Business Income and Extra Expense Professional Insurance Agents of NC-Provider#: 16241 Instructor: Chris McLeod CPCU,CIC,ARM,AIM,AAI,AU,AIP,CRIS,AINS,CISR,CPIW Course #: 205631 3.0 Hours NC General CE Copyrighted material (07/2016) of the PIA of NC, No distribution or copying allowed without the express written consent of PIANC
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Understanding Business Income and Extra Expense
Professional Insurance Agents of NC-Provider#: 16241
Instructor: Chris McLeod
CPCU,CIC,ARM,AIM,AAI,AU,AIP,CRIS,AINS,CISR,CPIW
Course #: 205631 3.0 Hours NC General CE
Copyrighted material (07/2016) of the PIA of NC, No distribution or copying allowed without the express written consent of PIANC
Understanding Business Income and Extra Expense
What is Business Income Coverage?
Disability Insurance for a Business
Understanding Business Income and Extra Expense
Why are Agents Reluctant to sell?
Lack of Knowledge?
Uncomfortable with the concept?
Understanding Business Income and Extra Expense
Direct vs Indirect Loss
Property and most policies we write are direct coverage policies
Business Income is Indirect – a consequence of a direct loss
Understanding Business Income Coverage
Basics
3 Forms
Business Income Coverage form and Extra Expense
Business Income Coverage Form
Extra Expense
Understanding Business Income Coverage
Definitions
Operations (Continuing Normal Operations)
Period of Restoration from incident until able to resume operations
Business Income – Net Income plus continuing normal operating expenses including payroll
Understanding Business Income Coverage
Description of Business Income on Dec
Business Income Including “Rental Value”
Business Income Other than “Rental Value”
“Rental Value”
Understanding Business Income and Extra Expense
Let’s Take a Break!
Understanding Business Income Coverage
Insuring Agreement
Five Coverage Triggers
Suspension of “operations”
During “period of restoration”
Caused by direct physical loss to property
On the described premises or within 100 feet
Covered Cause of Loss
Understanding Business Income Coverage
Covered Causes of Loss – Standard ISO
Basic
Broad
Special
Earthquake
Understanding Business Income Coverage
Exclusions
Power Failure outside the building
Finished Stock
Antennas
Suspension or Cancellation of Leases and Delays
Extra Expense beyond the “Period of Restoration”
Other Consequential Loss
Understanding Business Income Coverage
Additional Coverages
Covered Within Limit
Extra Expense
Civil Authority
Alterations and New Buildings
Extended Business Income
Understanding Business Income Coverage
Coverage Extensions
Newly Acquired Locations
Understanding Business Income and Extra Expense
Let’s Take a Break!
Understanding Business Income and Extra Expense
Limits of Insurance
Maximum pay out for any one loss
Coverage Extensions ARE additional limits
Additional Coverages do not increase limits
Understanding Business Income and Extra Expense
Limitation – Electronic Media and Records
Additional Condition – Coinsurance Payroll Limitations
Power Heat and Refrigeration Deduction
Danger – Guesstimate
Understanding Business Income and Extra Expense
Optional Coverages
Agreed Value
Maximum Period of Indemnity
Monthly Limit of Indemnity
Understanding Business Income and Extra Expense
Agreed Value
Suspends Coinsurance
Must Request at Renewal
Cannot use with Business Income from Dependent Properties Broad Form
Understanding Business Income and Extra Expense
Maximum Period of Indemnity
No Coinsurance
Pays Actual Loss Sustained including Extended Business Income during the first 120 days after the beginning of “period of restoration”
Cannot Blanket
Understanding Business Income and Extra Expense
Monthly Limit of Indemnity No Coinsurance
Maximum loss payment in any 30 day period is The Limit of Insurance multiplied by
Fraction specified on Declaration Page
1/3, ¼, 1/6
(NOTE FRACTION DOES NOT REPRESENT A NUMBER OF MONTHS)
Understanding Business Income and Extra Expense
Example
Limit of Business Income - $100,000
written on ¼ limitation
Provides $25,000. each 30 days
llst 30 days claim $30,000 pays $25,000
2nd 30 days claim $10,000 pays $10,000
3rd 30 days claim $40,000 pays $25,000
4th 30 days claim $25,000 pays $25,000
5th 30 days claim $20,000 pays $15,000
Understanding Business Income and Extra Expense
EXTENDED PERIOD OF INDEMNITY
Lengthens Extended Business Income up to 30 days
Remember more coverage time required Higher Limits
Understanding Business Income and Extra Expense
Extra Expense
Definition
Understanding Business Income and Extra Expense
Goal
To maintain partial operational continuity following a loss
Understanding Business Income and Extra Expense
Who Needs Extra Expense?
Understanding Business Income and Extra Expense
Examples of “Extra”
Temporary Help
Advertising
Quick Ship on Equipment
Temporary Location
Any expense to expedite getting business up and running
Understanding Business Income and Extra Expense
Common Limits
40/80/100
100/100/100
35/70/100
Understanding Business Income and Extra Expense
Examples
40/80/100 (percentages)
40% 0 to 30 days
80% 31 days to 60 days
100% 61 days plus
Starts at period of restoration
Understanding Business Income and Extra Expense
Thanks for attending today’s session.
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