Risk Assessment: Evaluating Coverage from a Loss Perspective
- ...has a book value of $100,000 but costs three times that to replace, and has an actual cash value of $250,000, the client will painfully learn the meaning of coinsurance!)
- “Fireproof” safes aren’t necessarily immune to fire, water and smoke damage! Did the client periodically duplicate important records and annual inventory lists and store them off-premises? Is there a backup plan to offset the loss of computerized data processing and information systems that have been affected?
- How will the business be kept alive without adequate cash flow or reserves? (Insurance companies are not always willing to advance monies!)
- Who is responsible for insuring leased items, the client or the lessor? Do the leases contain hold-harmless agreements? Who will be responsible for tenant improvements and other lease provisions? What would happen if no replacement is made?
- What will the client do with new goods they expect to receive, once they have lost the facilities to store them? How much will temporary rental facilities cost? Who will pay for them?
- What about accounts receivable claims? Can they be documented?
- Does the client have any plans for maintaining market share? Have they considered the extra costs that will be incurred to protect that share?
- Does the client understand the difference between expediting and extra expenses? Are they prepared to track these expenses properly?
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