Insuring Accounts Receivable
Valuable Papers and Records Understanding the Exposures and Available Coverage
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one-of-a-kind historical documents, and rare first edition books, particularly copies autographed by the author, individual amounts of insurance reflecting their individual appraised value must be provided for each item to be insured.
Irreplaceable items that are not scheduled are not covered. Also, the insured objects should be reappraised periodically, every two or three years or so, to reflect inflation and the current market conditions. The schedule of amounts must be adjusted accordingly.
The coverage is “all risk” but subject to various exclusions common to inland marine policies. Most important, perhaps, for records
Irreplaceable items that are not scheduled are not covered. Also, the insured objects should be reappraised periodically, every two or three years or so, to reflect inflation and the current market conditions. The schedule of amounts must be adjusted accordingly.
The coverage is “all risk” but subject to various exclusions common to inland marine policies. Most important, perhaps, for records
stored electronically, is the exclusion of loss or damage by electrical or magnetic destruction. To cover this exposure requires a separate coverage, Electric Data Processing coverage.
Insuring Accounts Receivable
Two coverages are available to insure Accounts Receivable, reporting form and non-reporting form. Both cover the cost of restoring Accounts Receivable records following their damage or destruction from a covered loss and paying for any shrinkage in collection of sums due.
The reporting form requires that the insureds submit monthly reports to the insurers showing the total current value of accounts receivable outstanding. Late or underreporting of values can result in reduced recovery of loss. The form has a limit of insurance as shown in the declarations. Premium is based on the values reported even if higher than the limit, but the insurer will pay no more than the limit of insurance in event of loss, so care should be taken to keep the limit as high as the highest outstanding accounts receivable value.
The non-reporting coverage does not require monthly reports of values, but if there are great variations in values from month to month the reporting form is usually less costly than the non-reporting coverage, the premium for which is based on the limit of insurance.
Insuring Accounts Receivable
Two coverages are available to insure Accounts Receivable, reporting form and non-reporting form. Both cover the cost of restoring Accounts Receivable records following their damage or destruction from a covered loss and paying for any shrinkage in collection of sums due.
The reporting form requires that the insureds submit monthly reports to the insurers showing the total current value of accounts receivable outstanding. Late or underreporting of values can result in reduced recovery of loss. The form has a limit of insurance as shown in the declarations. Premium is based on the values reported even if higher than the limit, but the insurer will pay no more than the limit of insurance in event of loss, so care should be taken to keep the limit as high as the highest outstanding accounts receivable value.
The non-reporting coverage does not require monthly reports of values, but if there are great variations in values from month to month the reporting form is usually less costly than the non-reporting coverage, the premium for which is based on the limit of insurance.
The limit should be set as high as the highest monthﾒs value, or alternatively, if values follow a seasonal pattern, the limits can be raised or lowered seasonally to meet the current level of need. The only problem here is in neglecting to keep pace with the changing needs, which can result either in unnecessary extra cost or, in event of loss, possible underinsurance.
Protecting Valuable Papers & Records
While insurance clearly is called for to protect against loss of valuable records, even more important is a program of records protection well thought out and rigorously enforced. This should include at least the following:
1. Storage of all important records in fire and burglary resistant locked files when not in use, and whenever premises are closed.
2. Records should be returned promptly to storage after use.
3. Duplicates of important records should be stored at a secondary location remote enough not to be involved in the same loss. How far away is open to question, as tenants in the World Trade Center may have discovered. Transfer of duplicates to the secondary location should be done at least daily, perhaps more often with electronic data.
Protecting Valuable Papers & Records
While insurance clearly is called for to protect against loss of valuable records, even more important is a program of records protection well thought out and rigorously enforced. This should include at least the following:
1. Storage of all important records in fire and burglary resistant locked files when not in use, and whenever premises are closed.
2. Records should be returned promptly to storage after use.
3. Duplicates of important records should be stored at a secondary location remote enough not to be involved in the same loss. How far away is open to question, as tenants in the World Trade Center may have discovered. Transfer of duplicates to the secondary location should be done at least daily, perhaps more often with electronic data.
