Business Income Insurance



A large-scale example of these types of losses occurred when the World Trade Center was attacked on September 11, 2001. That disaster produced many losses for insureds outside the World Trade Center property. Only those insured’s with the foresight to have business income from dependent properties coverage were covered for their losses.

It should be noted that the insurance for a contributing location does not apply to suppliers of utility services (electricity, water, steam, heat, communications, etc.) to the insured. To cover off-premises service interruption, the off- premises service—time element endorsement is used. The type of service interruption to be covered must be stated: communication or power supply (with or without overhead transmission lines), water supply, or whatever.

Question: In a period of high inflation, how can a business anticipate the proper amount of Business Income insurance to carry to guarantee adequate coverage for the worst possible loss that might occur?


Even at times when this is not as great a problem as it has been, such as when the nation experienced double digit inflation, we still experience creeping, rather than galloping, inflation. This can still present problems which must be recognized.

The first step, which is already acknowledged by the question, is to recognize that the problem exists. Having done this, then take any of several steps to alleviate the problem. These can include:

A word of caution here: When the agreed value feature is used, it is imperative that new values be reported annually within the reporting time shown in the endorsement. If a report is not filed on time, the coinsurance provision again applies until a new report is filed. And since, if the business is expanding or inflation is rampant, or both, the amount of insurance carried will be inadequate to satisfy the coinsurance requirement, and a coinsurance penalty can result.

One bit of good news though: Coinsurance would apply to the policy year when the loss occurs. Formerly, under the older business interruption forms, it applied to the 12 months immediately following the date of loss, producing a potentially greater coinsurance penalty than with the current forms.

Question: The coverage offered by the Civil Authority clause of business income policies is troubling: 1.) Is the length of time given for the coverage long enough? 2.) Are there potentially severe exposures not covered by this clause? If so, how can they be insured?


The current standard Civil Authority clause provides three...