According to partner Robert Glasser from the Dempsey Partners L.L.C. New York Office, it is very important for a company to assess its needs for business interruption coverage and to do so carefully.
That said, while CFOs and risk managers are typically confident in determining many of the insurance needs of their organizations, they often balk in the face of business interruption because they don’t have a structured approach to provide them with the information they require to make their decision regarding this coverage and its limits.
Unfortunately, this discomfort with business interruption insurance is causing many companies in the middle-market to discover that they are underinsured, and when they face a major loss, they don’t have the protection they need to receive enough in payments to continue their operations. Equally, they could be over-insuring themselves and pay far too much in premiums for the coverage beyond what that they actually require.
Experts in this sector of the insurance market are recommending that when it comes time for renewal CFOs and risk managers review their policies, taking a close look on the insured or reported values for the coverage for business interruption as well as on the various extensions of coverage that apply to your business based on its specific needs and operations.
Working with the broker to determine the accurate values for business interruption can assist in the effort of choosing the right amount of coverage and respective limits. It will help a business to be able to better minimize and manage any financial risk that could come as a result of interruption.
It is also helpful in determining what additional coverage might be required, such as:
• Contingent business interruption
• Ordinary payroll coverage
• Claim preparation fees
• Extended period of indemnity
• Expediting expense
• Service interruption/power outage, including overhead transmission and off-premises lines
• Extra expenses
• Selling price of finished goods inventory
• Loss of attraction
• Civil authority
• Sue and labor
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