Business Income Insurance:
An essential part of every business plan
Disasters happen. Businesses temporarily close. Revenue streams dry up. But expenses continue… and often rise significantly.
A Business Income worksheet prompts the review of business continuity strategies and recovery plans. Business Income insurance is an essential part of a company’s blueprint for survival.
Disaster survival coverage
Following a major loss, there are lots of things that a business can do without... revenue isn’t one of them.
Most businesses underestimate the amount of time it takes to return to normal operations. Consider the following:
• Cause and origins investigations and debris removal can span 1-2 months
• Securing permits can take 2-3 months (even longer in urban settings due to density and local authority)
• Reconstruction can take 7-12 months (longer for complex operations)
• Replacement of machinery and equipment can take 2-18 months (testing can add another 2 months)The EPA and other regulatory agencies can create further delays
Rounding out a client’s property insurance program with business income coverage reduces their exposure to unforeseen loss while enhancing your professional image. A customer-completed Travelers Business Income worksheet can also help to reduce your agent’s E&O exposure.
• Coverage for ordinary payroll assists in the retention of valued employees during the period of restoration
• For most businesses, revenue streams are not constant throughout the year; the BI worksheet identifies seasonal variation of revenue
• Most businesses rely on others to either supply, sell or draw customers; the BI worksheet guides the insured through identifying their dependent business income sources
• Most businesses underestimate the additional costs associated with a loss; the extra expense section of the worksheet identifies expenses that may be insured
Business income and extra expense worksheets
Business Income coverage increases a business’ ability to survive
a substantial loss. Travelers Business Income worksheets serve as a reality check for the period of restoration.
Business income benchmarks
Determining the appropriate amount of business income coverage for a business is unique to its individual needs and exposures. Fortunately, operational similarities within homogeneous industry segments have allowed for the creation of reliable “benchmarks” that can serve as a starting point for these determinations.
These benchmarks are expressed as percentages of the business’ total annual revenue and represent the amount of BI coverage that a business within that industry would typically need to fund a 12-month BI Value. These benchmarks include 100 percent payroll and benefits expense. Adjustments to the benchmarks may be necessary based on the amount of ordinary payroll inclusion or exclusion.
These benchmarks are only a guide; there is no substitute for a completed BI worksheet.